WASHINGTON (Reuters) – U.S. existing home sales unexpectedly fell in April as higher mortgage rates and house prices weighed on demand, dealing another setback to the housing market.
Home sales slipped 1.9% last month to a seasonally adjusted annual rate of 4.14 million units, the National Association of Realtors said on Wednesday. Economists polled by Reuters had forecast home resales would rise to a rate of 4.21 million units.
Sales decreased for a second straight month despite an improvement in supply. Sales fell 1.6% in the densely populated South and dropped 1.0% in the Midwest, which is considered the most affordable region. They tumbled 4.0% in the Northeast and declined 2.6% in the West.
The housing market has taken a step back after residential investment grew at its fastest pace in more than three years in the first quarter amid a resurgence in mortgage rates.
The average rate on the popular 30-year fixed-rate mortgage has struggled to break below 7% after surging to more than a five-month high of 7.22% in early May, data from mortgage finance agency Freddie Mac showed.
Government data last week showed single-family housing starts and building permits fell in April. Homebuilder confidence deteriorated considerably in May.
Home resales, which account for a large portion of U.S. housing sales, fell 1.9% on a year-on-year basis in April.
“Home prices reaching a record high for the month of April is very good news for homeowners,” said Lawrence Yun, the NAR’s chief economist. “However, the pace of price increases should taper off since more housing inventory is becoming available.”
Housing inventory increased 9% to 1.21 million units last month. Supply jumped 16.3% from one year ago. The rise in inventory was concentrated in homes priced $1 million or more, where supply rose 34% from a year ago.
At April’s sales pace, it would take 3.5 months to exhaust the current inventory of existing homes, up from 3.0 months a year ago. A four-to-seven-month supply is viewed as a healthy balance between supply and demand.
The median existing home price shot up 5.7% from a year earlier to $407,600, the highest price for any April. Home prices rose in all four regions.
Properties typically stayed on the market for 26 days in April, up from 22 days a year ago. First-time buyers accounted for a third of sales, compared to 29% a year ago. That share is well below the 40% that economists and realtors say is needed for a robust housing market.
All-cash sales made up 28% of transactions in April, unchanged from a year ago. Distressed sales, including foreclosures, represented only 2% of transactions, virtually unchanged from last year.