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First Cut: Sales of existing homes fall in March as buyers exit the market during pandemic

Sales of existing homes fell 8.5% in March to 5.27 million units (SAAR) after 5.76 million units in February that was the highest 13 years. The abrupt decline is likely only the first of several months that will reflect most consumers exiting the housing market until the pandemic is past and the economy on a better footing. There are still homebuyers out there, but the pool is more limited to those with the most secure employment and highest credit ratings. The kinds of rates that will be attractive to potential homebuyers are going to make mortgage lenders more reluctant to take risks. The March level was 0.8% above the year-ago month when homebuyers were getting more engaged with purchasing as mortgage rates continued to slide from the highs seen in November 2018. However, last year the economy was widely seen as on a sustained path of modest-to-moderate growth and the labor market was strong. Consumers were more willing to take on a home purchase.

Sales were down 8.1% for single-family units and off 11.7% for multi-units. Sales were down in all four regions as consumers stayed home and worried about household balance sheets with widespread business closures affecting earnings and employment prospects.

The median price of an existing home was up 3.8% to $280,600 in March from February. The NAR said it anticipated home prices to continue to rise with supplies limited. The months’ supply of homes on the market remained quite low at 3.4 in March after 3.0 in February. However, I question that expectation. Those consumers still home shopping are probably going to press hard for price concessions with less competition for available units and an economic downturn that means housing isn’t likely to pick up immediately once the pandemic has faded. The affordability of homes in relation to mortgage rates is not going to help prices if buyers are few and far between.

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