Unrest about the economy is continuing to weigh against the housing market’s performance entering spring
Sales of existing homes slumped to a nine-month low in March, posting a bigger-than-expected drop amid continuing economic unease, uncertainty around potential job losses, and an acute supply shortage.
The National Association of Realtors NAR said on Monday that sales were down by 3.6% last month, slipping to their lowest point since June. The seasonally adjusted annual rate of sales fell to 3.98 million units, lower than expectations of economists polled by Reuters who had expected to see a pace of 4.06 million units.
Mortgage rates were on a steady climb throughout last month as US Treasury yields jumped after the beginning of attacks by the US and Israel on Iran.
Rates finally fell last week, according to Freddie Mac, but remain much higher than where they sat before the outbreak of the war.
But March sales likely reflected contracts signed in the opening two months of the year when rates were on the way down – and a continuing supply crisis was likely a big part of the reason for the lower numbers, according to NAR’s chief economist Lawrence Yun.
“An additional 300,000 to 500,000 homes for sale would help bring the market closer to normal conditions and allow consumers to make purchase decisions without feeling rushed,” he said in remarks accompanying the announcement.
Those inventory constraints are putting more pressure on home prices. Yun pointed out that the median home price hit a new record high for March last month, meaning the average homeowner has accumulated $128,100 in housing wealth since 2020.
With mortgage rates not expected to see a pronounced drop anytime soon, the NAR now believes the housing market won’t perform as strongly throughout 2026 as it first predicted.
The association revised its existing-home sales projections to a 4% increase, while new-home sales are expected to hold steady. Previously, the NAR expected new-home sales to increase by 5%. Prices are also expected to rise by 4% year over year, consistent with its first prediction.
The Iran war has dented homebuyer confidence and also seeped into how consumers are viewing other sectors of the economy.
A University of Michigan survey released last week showed that its headline index of consumer sentiment tumbled by 10.7% from March, with inflation expectations rising sharply.
The closure of the Strait of Hormuz, a key oil shipping route, has sent oil prices skyrocketing during the last several weeks – and consumers now expect a bigger inflation increase over the next year than first forecast.
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