Existing home sales unexpectedly fall in March, reversing recent gains

U.S. existing home sales resumed their downward spiral in March as a sharp jump in mortgage rates cooled consumer demand.

Sales of previously owned homes tumbled 2.4% in March from the prior month to an annual rate of 4.4 million units, according to new data released Thursday by the National Association of Realtors (NAR). On an annual basis, existing home sales are down 22% when compared with March 2022. 

"Home sales are trying to recover and are highly sensitive to changes in mortgage rates," said Lawrence Yun, NAR chief economist. "Yet, at the same time, multiple offers on starter homes are quite common, implying more supply is needed to fully satisfy demand. It’s a unique housing market."

The interest rate-sensitive housing market has cooled rapidly in the wake of the Federal Reserve's aggressive tightening campaign. 

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Policymakers already lifted the benchmark federal funds rate nine consecutive times and have signaled that a 10th increase is on the table at their May meeting amid signs of underlying inflationary pressures within the economy.

For months, higher mortgage rates have dampened consumer demand and brought down home prices. As rates have slowly fallen from a peak of 7%, the housing market has shown early signs of stirring back to life.

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Limited inventory has also bolstered demand and prices this month. 

A recent report from Realtor.com showed that the number of available homes on the market in March is down more than 50% from the typical amount before the pandemic began.