By Lucia Mutikani
WASHINGTON, May 11 (Reuters) – U.S. existing home sales rebounded less than expected in April, and could struggle to gain altitude as mortgage rates remain elevated and rising inflation squeezes household budgets.
Prospective homeowners have largely been priced out, with the report from the National Association of Realtors on Monday showing listed houses were staying longer on the market relative to the same period last year. Though the increase in the median house price slowed from 2025, the level was the highest for any April. Supply continues to run below pre-pandemic levels.
“Many homes on the market are lingering due to lack of buyer interest,” said Ben Ayers, senior economist at Nationwide.
“This speaks to the deep affordability issues for potential buyers which have been exacerbated by the recent spike in mortgage rates. Until mortgage rates ease, most first-time buyers will continue to view home ownership as cost prohibitive compared to renting.”
Home sales rose 0.2% last month to a seasonally adjusted annual rate of 4.02 million units, the NAR said. Economists polled by Reuters had forecast home resales would rise to a rate of 4.05 million units. The gain came from the multi-family housing segment, with single-family home sales flat.
Existing home sales are counted at the closing of a contract. Last month’s sales likely reflected contracts signed in February and March.
The average rate on the popular 30-year fixed-rate mortgage dropped to 5.98% in late February before jumping to 6.38% by the end of March, data from Freddie Mac showed. Mortgage rates increased in response to rising inflation, stoked by the U.S.-Israeli war with Iran. The 30-year fixed rate, which vaulted to 6.46% in early April, averaged 6.37% last week.
Consumer prices surged in March, posting their biggest annual increase in nearly two years. The government is expected to report on Tuesday that the Consumer Price Index jumped 3.7% on a year-over-year basis in April, according to a Reuters survey of economists, which would be the largest gain since September 2023.
The NAR’s housing affordability index slipped to 110.6 from 113.5 in March. It was, however, up from 101.4 a year ago. Residential spending, which includes home building and sales, has contracted for five straight quarters.
CONSUMER SENTIMENT AT RECORD LOWS
Though wages have maintained their strong pace of increase, they are being eroded by high inflation. The national average retail gasoline price has soared more than 50% since the war started. Inflation-adjusted wages and salaries rose 0.1% in the 12 months through March, the government reported last month.
With consumer sentiment at record lows, economists said a meaningful increase in home resales was unlikely.
“We don’t expect sales to average far above 4 million annualized this quarter, with the risks tilted to the downside,” said Bradley Saunders, North America economist at Capital Economics.
Home sales increased in the South and Midwest regions. They fell in the West and were unchanged in the Northeast. Overall sales were flat compared to a year ago in April. The median existing home price last month rose to $417,700, a record high for April, and up 0.9% from a year ago. Most of the homes sold last month were in the $250,000-$500,000 price range.
Homes priced at $1 million and above are performing better than the rest of the market. That highlights what economists call a “K-shaped” economy, where higher-income households are doing well relative to their lower-income peers, thanks to a stock market rally.
The inventory of existing homes increased 5.8% to 1.47 million units, remaining well below the roughly 1.83 million units that prevailed before the COVID-19 pandemic.
“We really need to see 30% growth in inventory,” said NAR chief economist Lawrence Yun.
At April’s sales pace, it would take 4.4 months to exhaust the current inventory of existing homes, up from 4.3 months a year ago. The median number of days on the market for listed properties increased to 32 from 29 a year ago.
First-time buyers accounted for 33% of sales, down from 34% a year ago. Economists and realtors say a 40% share in this category is needed for a robust housing market. All-cash sales constituted 25% of transactions, unchanged from a year ago.
Vacation homes accounted for 8% of sales, up from 5% in April last year. Distressed sales, including foreclosures, made up 2% of transactions, holding steady from a year ago.
“No one who has a home is selling it, people with ultra-low Covid-era mortgages cannot afford to give them up,” said Carl Weinberg, chief economist at High Frequency Economics. “If no one is selling, no one can be buying and inventories are low.”
(Reporting by Lucia Mutikani; Editing by Paul Simao and Andrea Ricci )
