Sales of existing homes dropped 2.7% in March to a seasonally adjusted, annualized rate of 5.77 million units, according to the National Association of Realtors. February's reading was also revised downward with a larger-than-usual dent, from 6.02 million units to 5.93 million.
March sales were 4.5% lower than the same period in 2021.
The reading is based on closings, meaning the contracts were likely signed in January and February, when mortgage rates began to rise but had not yet shot up as sharply as they did in March. The average rate on the 30-year fixed mortgage stood at 3.29% at the beginning of January and rose to 3.9% by the end of February, according to Mortgage News Daily. The 30-year fixed rate now stands at 5.35%.
Higher rates exacerbated an already pricey market for buyers. The median price of an existing home sold in March was $375,300, an increase of 15% from March 2021. That's the highest median price ever recorded by the Realtors.
With rates rising, and prices significantly higher, the average borrower is paying about 38% more on the monthly payment now than they would have for the same home one year ago, according to Realtor.com.
Prices continue to rise because the supply of homes for sale is still incredibly low amid strong demand from millennials. At the end of March there were 950,000 homes for sale, a decrease of 9.5% year over year. At the current sales pace that represents a two-month supply.
The supply of homes for sale is worst at the lowest end of the market, skewing sales toward the more expensive end.
Sales of homes priced between $100,000 and $250,000 were 21% lower compared with a year ago, while sales of homes priced between $750,000 and $1 million rose 30%. Homes priced above $1 million saw a 25% sales jump.
"We know that the builders have been underproducing since the foreclosure crisis, which is the reason we have this shortage," said Lawrence Yun, chief economist at the National Association of Realtors. "But when mortgage rates increase, we have seen several months of inventory rising."
Homes that are for sale are moving quickly with average days on the market just 17 days, down from 18 days a year ago. And cash is king. It made up 28% of all sales in March, the highest since July 2014.
More recent weekly housing data from Realtor.com suggests that supply may be on the upswing, with increases in fresh listings.
"A bit of good news for buyers as we are in what is typically the best time of year to list a home for sale," said Danielle Hale, chief economist at Realtor.com in a release. "Combined with moderation in home sales, this should mean a greater number of options for remaining home searchers to choose from."
Correction: At the end of March there were 950,000 homes for sale. An earlier version misstated the figure.