U.S. home sales fell sharply in March, dropping to their lowest level for the month since 2009, as elevated mortgage rates, rising inventories, and growing economic uncertainty continued to chill the residential real estate market. Sales of previously owned homes fell 5.9% from February to a seasonally adjusted annualized pace of 4.02 million units, according to data released Thursday by the National Association of Realtors.
The downturn highlights a sputtering start to the spring homebuying season, historically one of the busiest periods for the housing sector. "Home buying and selling remained sluggish in March due to the affordability challenges associated with high mortgage rates," said Lawrence Yun, NAR's chief economist.
Compared to March 2024, sales were down 2.4%, with declines across every major U.S. region on a monthly basis. The West, the country's most expensive housing region, saw the steepest month-to-month drop at over 9%. Still, it was the only region to post a year-over-year sales gain, driven by strength in Rocky Mountain states with robust job growth.
Mortgage rates, which topped 7% for much of January and early February, remained a significant headwind. "It looks like the mortgage rate is the magical influence for the housing market," Yun said, adding, "It's definitely possible that the swings in the stock market in recent times may have also shocked some people into pulling back."
As of Thursday, the average 30-year fixed mortgage rate stood at 6.8%, according to Freddie Mac. "Under the normal spread between the 10-year and mortgage rates, the mortgage rates today should be about 6.3 percent or even 6 percent, but instead we're closer to a 7 percent rate," Yun said. He attributed the elevated spread in part to the Federal Reserve's continued sale of mortgage-backed securities and speculated that foreign holders may also be offloading MBS "as part of the trade war positioning."
Despite weaker sales, inventory climbed. At the end of March, 1.33 million homes were listed for sale, nearly 20% more than the same time last year. At the current pace of sales, that represents a 4-month supply-still below the 6-month level considered a balanced market.
The median price for an existing home sold in March was $403,700, up 2.7% from a year ago and a record high for the month. However, the annual price growth has slowed steadily since December and is now at its weakest level since August. "In a stark contrast to the stock and bond markets, household wealth in residential real estate continues to reach new heights," Yun said. He cited Federal Reserve data estimating total real estate asset valuation at $52 trillion.
First-time buyers made up 32% of March transactions, matching the rate from a year earlier but still well below the historical average of 40%. All-cash purchases fell to 26% of total sales, down from 28% in March 2024. Investor activity held steady at 15%.
