U.S. home shoppers hoping for a robust spring selling season got more evidence Wednesday that the market remains stubbornly sluggish. The National Association of Realtors said existing-home sales in April edged down 0.5 percent from March to a seasonally adjusted annual rate of 4.00 million. That is 2 percent lower than a year earlier and barely three-quarters of the volume the housing market averaged before the pandemic. National Association of REALTORS®
The decline coincided with another uptick in borrowing costs. Freddie Mac’s weekly survey showed the average 30-year fixed mortgage rate at 6.86 percent in late May, the highest since mid-February and roughly double the average rate buyers enjoyed as recently as 2021. Freddie Mac For would-be purchasers, each percentage-point increase adds roughly $200 to the monthly payment on a $400,000 loan—enough to sideline many first-time buyers.
Prices, meanwhile, continue to climb. The median price of an existing home sold in April reached $414,000, a record for the month and a 1.8 percent gain from a year earlier, marking the 22nd consecutive month of annual price increases. National Association of REALTORS® That resilience reflects a market still short on supply despite a modest improvement in listings: the inventory of unsold homes stood at 4.4 months, up from 3.9 months a year ago but below the six-month level economists view as a balanced market.
“Home sales have been running at about 75 percent of normal for three straight years,” said Lawrence Yun, N.A.R.’s chief economist. “Pent-up demand keeps building, but buyers need a meaningful drop in mortgage rates before it can be released.” National Association of REALTORS®
Regional data show the pain was not evenly distributed. Sales in the West—the nation’s most expensive region—fell 3.9 percent from March, while the South held steady. National Association of REALTORS® Brokers in high-cost coastal markets say even qualified buyers are balking at mortgage payments that can now top $5,000 a month for a median-priced home.
New construction is filling part of the gap. Builders, armed with more plentiful lots and the ability to buy down interest rates, have boosted single-family housing starts 6 percent year-over-year. But economists note that newly built homes account for barely 15 percent of all transactions—hardly enough to offset the drought in existing inventory, which still sets the benchmark for prices in most neighborhoods.
Much of today’s gridlock is psychological. Roughly three-quarters of U.S. homeowners enjoy mortgage rates below 4 percent; few are eager to sell and trade that bargain for a rate near 7 percent. This “lock-in effect” has turned the typical discretionary seller into a reluctant landlord or permanent remodeler, further squeezing supply.
Buyers, for their part, are discovering more leverage than they have had in years. Real-estate agents from Phoenix to Philadelphia report growing willingness among sellers to cover closing costs, fund rate buydowns or agree to inspection repairs that would have been unthinkable in 2021’s bidding wars. Yet many shoppers remain on the sidelines, hoping the Federal Reserve will engineer at least two quarter-point cuts before year-end.
History suggests that a drop of even half a percentage point in mortgage rates can unleash significant pent-up demand—particularly among first-time buyers. The Fed’s preferred inflation gauge has eased for eleven consecutive months, raising expectations of a policy pivot later this summer. Should the average 30-year rate retreat toward 6 percent, economists at Moody’s Analytics estimate that closed transactions could climb back above an annual pace of 4.4 million by early 2026.
For now, though, the housing market remains a game of patience. Buyers hoping for deeper price cuts may be disappointed: household formation outpaces construction, and unemployment remains near half-century lows. Sellers unwilling to part with sub-4 percent loans may simply stay put. In that stalemate, April’s numbers are less a surprise than a sober reminder that America is still working through the aftershocks of an extraordinary era of ultra-cheap money.
Jarod Clark is a finance and real-estate writer based in Denver.