March 2018 Existing Home Sales

Existing home sales grew for a second consecutive month in March 2018 according to the National Association of Realtors.  At a seasonally adjusted annualized rate, completed contracts rose 1.1 percent to 5.6 million units.  However, the year-over-year tally is still 1.2 percent lower despite the strong monthly uptick.

Data were split regionally.  Starting with the good news, Northeast transactions jumped 6.3 percent; like the national number, they are still down from a year ago.  Midwest sales increased 5.7 percent in the period but have also fallen compared to a year earlier.  However, 0.4 percent fewer contracts closed in the South, but the year-over-year count is 0.4 percent higher.  Finally, transactions in the West dropped 3.1 percent but are hanging on to a 0.8 percent uptick in the past 12 months.

Prices firmed in the period.  The average price of an existing home rose 3.4 percent to $290,100 in March and is up 4.1 percent compared to March 2017.  The median priced home increased 3.9 percent to $250,400 and is 5.8 percent higher than a year earlier. 

Rates continued rising for borrowers.  According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage increased for the sixth consecutive month, reaching 4.4 percent versus 4.33 percent in February.  This lending rate bellwether reached its highest level since December 2013.  Notwithstanding higher rates, buyers remain eager even if current homeowners are less enthusiastic. 

Although it managed an uptick in March, a relatively small inventory may be pushing buyers to offer more money and hasten transaction times.  While there were 5.7 percent more homes on the market (1.67 million) than in February, total housing supply is down 7.2 percent from a year ago.  At the current transaction pace, unsold inventory represents a 3.6 month supply of homes.  A typical property stayed on the market for just 30 days, a week faster than in February.  Fifty percent of the homes sold in March were on the market for under a month.

Inventories and quick purchases suggest there is an imbalance between the number of willing buyers and sellers.  Price is likely to cause this relationship to normalize.  At some point, more sellers will come to the marketplace, or buyers will shy away.  Additionally, buyers have interest rate costs to consider, and this could cause demand to wane as well if borrowing money continues getting more expensive.  Generally speaking: price fixes price and should remedy this market as well.