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Home Prices in March Posted Biggest Annual Decline in 11 Years

It's interest rates stupid!

Home Prices in March Posted Biggest Annual Decline in 11 Years

Sales fell in March for the 13th time in the previous 14 months

By Nicole Friedman, WSJ

Updated April 20, 2023 2:46 pm ET

U.S. existing-home sales, which make up most of the housing market, fell 2.4% in March from the prior month. Photo: Tannen Maury/Shutterstock

Home sales fell across the U.S. in March, a sluggish start to the crucial spring selling season as higher mortgage rates squashed momentum from the previous month.

U.S. existing-home sales decreased 2.4% in March from the prior month to a seasonally adjusted annual rate of 4.44 million, the National Association of Realtors said Thursday. March sales fell 22% from a year earlier.

March marked the 13th time in the previous 14 months that sales have slowed. The housing market had a surprisingly strong February, when sales rose a revised 13.75% from the previous month. But after mortgage rates ticked higher, March sales resumed the extended period of declines.

The housing market’s slowdown is now starting to weigh on prices, which have fallen on an annual basis for two consecutive months for the first time in 11 years. The national median existing-home price decline of 0.9% in March from a year earlier to $375,700 was the biggest year-over-year price drop since January 2012, NAR said.

Median prices, which aren’t seasonally adjusted, were down 9.2% from a record $413,800 in June. Home prices in the western half of the U.S. experienced some of the biggest gains for many years but are now falling the fastest.

The U.S. housing market has slowed dramatically in the past year as rising mortgage rates, high home prices and persistently low inventory frustrated buyers.

March’s home sales declines don’t bode well for the spring season, which is usually the most active time for home sales because families with children often want to move homes between school years.

A cooling economy, with stubbornly high inflation and the prospect of recession in the next 12 months, is keeping some buyers on the sidelines. Consumers also borrowed less following the collapse last month of Silicon Valley Bank and Signature Bank, a Federal Reserve report said Wednesday.

Mortgage rates have fluctuated in recent months since hitting 20-year highs above 7% in the fall. The average rate for a 30-year fixed mortgage was 6.39% this week, up from 5.11% a year earlier and the first increase after five straight weeks of declines, according to Freddie Mac.

“The consumer appears to be very sensitive to changes in week-to-week mortgage rates,” said Lawrence Yun, NAR’s chief economist. “It almost appears that people are just waiting for the right rate before deciding or closing.”

Other housing data also pointed to slowing activity. Housing starts, a measure of U.S. home-building, fell 0.8% in March from February, the Commerce Department said this week. Residential permits, which can be a bellwether for future home construction, dropped 8.8%.

The housing market slowdown shows one of the main ways that the Fed’s aggressive interest-rate increases are rippling through the economy. Housing is one of the most rate-sensitive economic sectors, and high housing costs have been a big contributor to inflation.

This spring’s activity could still pick up over the next couple of months, especially if mortgage rates ease and more sellers feel comfortable listing. But it is likely to be muted compared with the housing boom that extended from mid-2020 through early 2022, when low mortgage rates and a desire for more space during the pandemic led to a surge of home sales.

Most people who bought homes in recent years don’t yet need to move again, and many homeowners are reluctant to give up their low mortgage rates, said Daryl Fairweather, chief economist at real-estate brokerage Redfin Corp.

“That demand has already run its course, and now we’re left with leftovers or people who missed the boat,” she said.

Home prices are declining the most in the West. But in other parts of the country, prices are still rising from a year earlier because inventory of homes for sale is unusually low for this time of year.

“Home prices continue to rise in regions where jobs are being added and housing is relatively affordable,” Mr. Yun said. “The more expensive areas of the country are adjusting to lower prices.”

Nationally, there were 980,000 homes for sale or under contract at the end of March, up 1% from February and up 5.4% from March 2022, NAR said. At the current sales pace, there was a 2.6-month supply of homes on the market at the end of March.

The number of homes for sale is up from a year ago because houses are sitting on the market longer. But the number of new listings in March fell 20% from a year earlier, according to

Inventory typically rises in the spring, as sellers want to take advantage of the busiest buying season.

“The question is, who’s going to win? Are the buyers going to chew up all the inventory that’s there and we’ll still be sitting waiting for more homes to come on?” said Bill Boswell, a real-estate agent in Wayne, N.J. “Or will enough homes come on to satisfy the demand?”

Ben Westphal and Charlie Rasmason bought a three-bedroom house in Westchester, Ill., in March. Photo: Morgan Meeker

Charlie Rasmason and Ben Westphal looked at houses in the Chicago suburbs in early 2022 but decided to keep renting because the available houses within their budget needed a lot of work. When they tried house hunting again in early 2023, there was more inventory available to choose from, but mortgage rates had risen, increasing their expected monthly payments.

They bought a three-bedroom house in Westchester, Ill., in March for $369,000, about $10,000 below the listing price. “It was the right call despite the interest [rate] being what it is,” Mr. Rasmason said. “It went as well as it could have.”

Homes typically go under contract a month or two before the contract closes, so the March sales data largely reflect purchase decisions made in February and January.

“I think we’ve hit kind of the bottom” in terms of pricing, said Lauryn Dempsey, a real-estate agent in the Denver area. “It’s definitely not as competitive as it was at the same time last year, but we definitely still have a really-low-inventory problem.”

News Corp, owner of the Journal, also operates under license from NAR.

Sarah Chaney Cambon contributed to this article.

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