Existing-home sales continued to falter in April.
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Existing-home sales continued their free fall in April, extending what is now a two-month slide in sales brought on by the coronavirus pandemic, according to the National Association of Realtors. All four major regions of the country experienced a decline in month-over-month and year-over-year sales, with the West seeing the greatest dip in both categories.
Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, dropped 17.8% from March to a seasonally-adjusted annual rate of 4.33 million in April. Overall, sales decreased year-over-year, down 17.2% from a year ago.
“The economic lockdowns – occurring from mid-March through April in most states – have temporarily disrupted home sales,” said Lawrence Yun, NAR’s chief economist. “But the listings that are on the market are still attracting buyers and boosting home prices.”
April’s existing-home sales are the lowest level of sales since July 2010 (3.45 million) and the largest month-over-month drop since July 2010 (-22.5%).
The median existing-home price for all housing types in April was $286,800, up 7.4% from April 2019 ($267,000), as prices increased in every region. April’s national price increase marks 98 straight months of year-over-year gains.
“Record-low mortgage rates are likely to remain in place for the rest of the year, and will be the key factor driving housing demand as state economies steadily reopen,” said Yun. “Still, more listings and increased home construction will be needed to tame price growth.”
Total housing inventory at the end of April totaled 1.47 million units, down 1.3% from March, and down 19.7% from a year ago (1.83 million). Unsold inventory sits at a 4.1-month supply at the current sales pace, up from 3.4 months in March and down from the 4.2-month figure recorded in April 2019.
“Home sellers are even more reluctant than home buyers to close a deal during this pandemic,” said Holden Lewis, a home and mortgage expert at NerdWallet, a San Francisco-based personal finance company. He added, “Today’s home buyers are chasing a dwindling number of homes for sale, and that’s why prices are rising. There is demand among buyers, but there just aren’t enough homes on the market.”
Ruben Gonzalez, chief economist at Keller Williams, added: “The recovery in existing home sales will likely need to be driven by confidence that the virus is genuinely receding and overall economic conditions improving.”
Properties typically remained on the market for 27 days in April, seasonally down from 29 days in March, but up from 24 days in April 2019. Fifty-six percent of homes sold in April 2020 were on the market for less than a month.
First-time buyers were responsible for 36% of sales in April, up from 34% in March 2020 and 32% in April 2019.
Individual investors or second-home buyers, who account for many cash sales, purchased 10% of homes in April, down from 13% in March 2020 and from 16% in April 2019. All-cash sales accounted for 15% of transactions in April, down from 19% in March 2020 and 20% in April 2019.
Distressed sales – foreclosures and short sales – represented 3% of sales in April, about even with both March 2020 and April 2019.
Single-family home sales sat at a seasonally-adjusted annual rate of 3.94 million in April, down 16.9% from 4.74 million in March, and down 15.5% from one year ago. The median existing single-family home price was $288,700 in April, up 7.3% from April 2019.
Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 390,000 units in April, down 26.4% from March and down 31.6% from a year ago. The median existing condo price was $267,200 in April, an increase of 7.1% from a year ago.
“There appears to be a shift in preference for single-family homes over condominium dwellings,” Yun said. “This trend could be long-lasting as remote work and larger housing needs will become widely prevalent even after we emerge from this pandemic.”
As was the case for the month prior, April sales decreased in every region from the previous month’s levels. Median home prices in each region grew from one year ago, with the Northeast and Midwest showing the strongest price gains.
According to realtor.com chief economist Danielle Hale, the path forward for home sales will resemble a W shape with homes sales rebounding in July, August and September as fears of the coronavirus begin to wane and buyers return to the market to make up for the lost spring home-buying season before dipping again in the final months of the year as virus infections are projected to spike again and the lingering impact of the high unemployment rates are felt.
“The U.S. housing market started 2020 with substantial momentum,” said Hale. “With some of the best home sales and housing starts in more than a decade, our biggest challenge going into the spring home-buying season was a lack of for-sale homes. The coronavirus pandemic has kept both buyers and sellers on the sidelines, preserving market balance, for now. As cities and states begin the slow process of reopening, we’re going to see a see-saw recovery with ups and downs that will favor the nation’s secondary markets in the short-term.”
Hale added, “The pandemic is leaving an imprint on the fabric of American life, culture and preferences, which we could see for years to come. After experiencing life under quarantine, many buyers are searching for affordability and greater space, which is driving demand out of the nation’s largest metros and into surrounding smaller towns.”
The forecast projects mortgage rates to drop to new lows below 3% by the end of the year, primarily driven by an accommodating Fed and tepid economic outlook.
Although rates will be favorable, the qualifying criteria will be tougher than normal as lenders seek to mitigate their own risks amid the unfolding economic uncertainty globally. The stricter qualifying criteria will require buyers to have higher credit scores in addition to more cash for down payments. Shopping around for the best rates and terms will be particularly important over the next year.
Millennials are projected to make up 50% of home purchases in 2020, but this number could grow if older generations decide to step back from the market.