Existing Home Sales Reach Lowest Level Since the Start of the Pandemic

Is that good news for buyers?

Sellers have had the upper hand in the housing market for several years now. That's largely due to the fact that residential real estate inventory has been extremely limited, forcing buyers to pay up across the country. 

But new data shows that home sales may be slowing. In April, sales of previously owned homes reached their lowest level since the start of the pandemic, according to the National Association of Realtors.

Specifically, existing home sales fell 2.4% last month compared to March's sales number. Existing home sales were also 5.9% lower than they were in April 2021.

Mortgage rates could be to blame

The fact that April's existing home sales numbers were lower means that fewer contracts to purchase a home were signed in the months prior. And that's not surprising given that mortgage rates have been on a steady climb since the start of the year.

From mid-2020 through the start of 2022, home buyers were able to take advantage of ultra-low borrowing rates -- rates that were low enough to help offset higher home prices. But since rates have been climbing, affordability has been sinking. And that at least partly explains why existing home sales numbers didn't look as solid for April.

Low inventory is also a factor

While rising mortgage rates may have contributed to lower sales numbers in April, inventory likely also played a role. Simply put, the housing market has sorely lacked inventory for months on end, and when there are fewer homes to buy, there are fewer deals to be closed on. 

At the end of April, there were just over 1 million homes for sale, which represents a 10.4% decline compared to April 2021. Or, to put it another way, as of late April, there was a mere 2.2-month supply of available homes on the market. For context, a normal housing market will feature a 4- to 6-month supply of homes available for purchase.

Are lower sales numbers a good thing for home buyers?

Not necessarily. Again, a big reason for lower sales numbers is that there were simply fewer homes to be bought in the first place. It's not like homes are sitting out on the market for months on end. Rather, real estate inventory is so weak that it's leading to fewer transactions. 

What’s more, rising mortgage rates may have played a role in lower April sales. But those aren't good for buyers, either. The fact that it's more expensive to get a mortgage could keep some buyers out of the market for longer. And given the Federal Reserve still has several rate hikes planned for 2022, we can't write off the possibility of borrowing rates climbing even more (though the Fed doesn't set mortgage rates, when it raises the federal funds rate, mortgage rates tend to follow suit).

All told, April's sales numbers are really sort of neutral news from a buyer standpoint. That may not be the most desired takeaway, but that's the reality of today's housing market.