Sales for homes that were selling for $1 million or more fell drastically in April throughout the U.S., with the largest decline occurring in the West, compared to a year ago. Pending home sales in April remained flat, according to the National Association of Realtors, a trade organization based in Washington D.C. Three U.S. regions reported gains during the month while the Northeast saw a decline. All four regions saw year-over-year declines in transactions.
But homes that sold for over $1 million saw a decline of 36.5 percent. The largest drop of 44 percent occurred in the West region, followed by 28.3 percent in the South, 28 percent in the Midwest and 24.6 percent in the Northeast. Homes that were slightly cheaper in the $750,000 to $1 million range still faced challenges as high mortgage rates and a lack of inventory discouraged shoppers. Sales dropped in the Northeast by 26.7 percent, in the Midwest by 15.3 percent, in the South by 28.1 percent and in the West by 38.1 percent.
Interest rates in April reached about 6 percent. As of April 27, the mortgage rate was 6.43 percent, according to Freddie Mac.
Overall in the U.S., million-dollar homes consisted of 6.3 percent of total sales, compared to 45.3 percent of sales for homes sold for $250,000 to $500,000, 17.1 percent of homes in the $500,000 to $750,000 range and 6.3 percent in the $750,000 to $1 million range. The price of the homes did not greatly impact the amount of time they were listed on the market.
In April, homes that were $1 million or more spent 18 median days on the market, compared to 14 days for homes costing $100,000 to $250,000 and 17 days for both $250,000 to $500,000 homes and $500,000 to $750,000 homes and 15 days for homes sold for $750,000 to $1 million, according to the National Association of Realtors. In April, the Pending Homes Sales Index (PHSI), an indicator of home sales based on contract signings remained flat at 78.9 in April. Pending transactions dropped by 20.3 percent in April compared to last year.
“Not all buying interests are being completed due to limited inventory,” said Lawrence Yun, chief economist for NAR. “Affordability challenges certainly remain and continue to hold back contract signings, but a sizeable increase in housing inventory will be critical to get more Americans moving.”
In the Northeast, the index fell by 11.3 percent while the Midwest index improved 3.6 percent. In the South, the index rose by 0.1 percent while the West also saw an increase of 4.7 percent in April.
“Minor monthly variations in regional activity are typical,” he said. “However, cumulative results over many years clearly point towards a much greater number of home sales in the South. The South’s pending home sales activity is similar to that of 2001, but the Midwest’s activity has decreased by 22 percent in that same period, and the Northeast and West regions are both about 40 percent lower than they were in 2001.”
The lack of inventory continues to pose problems for potential homebuyers, said Danielle Hale, chief economist of Realtor.com.
“Contract signings remained above the fourth quarter’s low levels but trailed the year-ago pace by 20.3 percent,” she said. “Because pending home sales or contract signings are the first major step in a home sale transaction, today’s index signals that the market faces continued headwinds from low inventory and affordability. Although buyers, sellers and builders are all more optimistic about the housing market, asking home price growth is easing, and the typical home sales price is slipping. These point to the nudge that buyers need to act on their improving outlook.”
Mortgage Rate Exceeds 7 Percent
But declines in home sales could continue as daily average rates hit 7.12 percent on May 25, reaching their highest level since November, according to Redfin, a real estate brokerage. Mortgage rates rose as there appears to be progress made on the discussions regarding the U.S. debt ceiling.
The typical homebuyer’s monthly mortgage payment reached a record high of $2,614 with a mortgage rate of 6.57 percent mortgage rate, the current weekly average. Pending home sales fell by 17.4 percent nationwide from a year earlier during the four weeks ending May 21, according to Redfin. The decline is the second largest one since January. Mortgage purchase applications fell also, dropping 4 percent from the week before.
Homeowners are waiting to sell their homes: new listings of homes for sale fell by 24 percent, one of the biggest drops since May 2020. Some people were able to purchase their homes when mortgage rates were much lower and are not eager to sell now because they would be locked into much higher interest rates.
“People may be wondering why rates are surging as we come up against a potential debt crisis,” said Chen Zhao, economics research lead for Redfin. “Right now, the way investors are reacting is the driving force.”
Mortgage rates rose during the past two weeks because talks about the debt ceiling appear to be more successful.
“That may seem counterintuitive, but optimism is driving rates up because an economic crisis would lead to the Fed lowering rates as they try to prevent a recession,” she said. “Now that Democrats and Republicans have come to the negotiating table and are making some progress toward a deal, rates are going up.”
