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Home sales totals expected to trend flat in 2022 due to higher rates, inventory shortages
Existing home sales fell 2.7 percent in March to a seasonally adjusted annual rate of 5.77 million annualized units, representing a 4 percent decrease in sales compared to last year. NAFCU Chief Economist and Vice President of Research Curt Long analyzes the data in the latest Macro Data Flash report.
“Existing home sales fell again in March. The inventory-to-sales ratio rose slightly but remains extremely depressed,” said Long.
“Despite the surge in mortgage rates, the market remains demand-heavy," added Long. "Many would-be sellers are likely reluctant to part with two valuable assets: their current home and their mortgage rate."
Based on current month sales, there were 2.0 months of supply in March, slightly up from 1.7 months in February, with analysts considering six months of inventory a rough balance between supply and demand.
Sales fell in most regions last month, with the Midwest falling by 4.5 percent on the month, followed by the South (-3 percent), and the Northeast (-2.9 percent). The West saw no change.
“There is evidence that demand is cooling due to higher mortgage rates," noted Long. "Fannie Mae's Home Purchase Sentiment Index found that an all-time low net share of respondents say it is a good time to buy a home right now.
"But it will take more demand destruction to find a balanced market, and until then prices will continue to surge and affordability conditions will continue to deteriorate," concluded Long. "First-time homebuyers represented 30 percent of sales in March, which was two percentage points lower than March 2021. NAFCU expects home sales totals to trend flat this year due to higher rates and inventory shortages."
On the topic of affordability, new research released from The Pew Charitable Trusts found that tens of millions of Americans – many of whom are sufficiently creditworthy to get a mortgage – have used alternative financing arrangements, in which buyers make payments directly to sellers, due to the lack of such mortgages, especially for amounts less than $150,000.
Of note, the median existing-home price, non-seasonally adjusted, rose to $375,300 in March, which is 15.0 percent higher than last year.
For more economic updates from NAFCU's award-winning research team, view all of NAFCU's Macro Data Flash reports.