US Home Sales Sink To 6-Month Low As High Rates Rattle Buyer Confidence

The US housing market witnessed a slowdown in April, with sales of existing homes dropping to the lowest level in six months. This slump is attributed to high interest rates and dwindling consumer confidence.

What Happened: Sales of existing homes in April dipped by 0.5% from March, reaching a seasonally adjusted annualized rate of 4 million units, as per data from the National Association of Realtors. This represents the slowest pace since last October, marking a 2% decrease from April of the previous year.

Contrary to predictions by housing economists for a 2.7% gain, the sales count, likely based on closings signed in February and March, declined prior to the rise in mortgage rates in April. “Home sales have been at 75% of normal or pre-pandemic activity for the past three years, even with seven million jobs added to the economy,” said Lawrence Yun, NAR’s chief economist.

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Housing inventory rose 9% in April from March and was nearly 21% higher than a year earlier. The median price of an existing home sold reached $414,000, a modest 1.8% gain from last year.

“At the macro level, we are still in a mild seller’s market,” Yun added. “But with the highest inventory levels in nearly five years, consumers are in a better situation to negotiate for better deals.”

Why It Matters: The report showing a slowdown in home sales comes on the heels of a surge in mortgage rates. Mortgage rates reached a three-month high as long-term U.S. Treasury yields surpassed the critical 5% mark this week, driven by rising deficits and fiscal policy fears. This led to a 5.1% drop in mortgage application volumes for the week ending May 16, marking the steepest decline in a month.

Despite the overall slowdown, some companies like Toll Brothers Inc. TOL reported strong Q2 results. The company’s quarterly earnings and revenue surpassed analyst estimates, indicating that some housing market segments are still performing well despite the broader downturn.

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