High interest rates continue to stifle market demand, coupled with tariffs increasing economic uncertainty, leading to a collapse in USA home sales in March, reaching the worst level since the financial crisis.
According to the latest report from the National Association of Realtors (NAR), in March, existing home sales in the USA fell by 5.9% month-on-month. Seasonally adjusted, it was 4.02 million units, marking the largest month-on-month decline since November 2022, and also the slowest sales pace for March since 2009, when it was close to the peak of the financial crisis.
High mortgage rates continue to suppress buyer activity, while the growth rate of supply exceeds demand, leading to an increase in the inventory of homes for sale, which makes buyers more selective.
More critically, economic uncertainty has intensified in recent weeks, which could deter more buyers. Some Americans are worried that their jobs might be at risk, or that a drop in the stock market may delay their purchase of new homes.
Despite suppressed demand, home prices remain high due to a lack of supply. In March, the median price of existing homes nationwide rose by 2.7% year-on-year, reaching 0.4037 million dollars, setting a historical record for the same period.
High interest rates are the "culprit," and tariffs might deter more buyers.
Persistently high mortgage rates are a primary reason for the sluggish market. Although the Federal Reserve has paused interest rate hikes for several months, the 30-year fixed mortgage rate still hovers around 6.9%, well above the 3% low during the pandemic. This high-rate environment has directly led to a sharp decline in housing affordability, with many potential buyers finding themselves priced out of the market.
On the other hand, so far this spring, the supply of houses in the USA has been growing faster than the demand, and the inventory of homes for sale is rising. NAR Chief Economist Lawrence Yun stated:
Even with the increase in inventory, the sales of existing homes are still struggling to gain momentum. There was hope for a meaningful recovery this year, but so far there hasn't been any.
The data from March mainly reflects the buying decisions made in February and January, when the announcement of tariffs in the USA had not yet disrupted the market, and some economists thus predicted that the economy would fall into recession. Home sales saw an increase in February, as some buyers and sellers who had been waiting for the market to improve decided to take action.
However, in recent weeks, economic uncertainty has heightened, frightening more buyers and even leading to a decline in some home sales. Americans sometimes postpone the purchase of new homes due to worries about the economic situation, potential job risks, or concerns about a stock market downturn.
