The U.S. spring housing market is facing headwinds as elevated mortgage rates and low consumer confidence continue to suppress activity. In April, sales of previously owned homes declined by 0.5% from the prior month, reaching a seasonally adjusted, annualized rate of 4 million units. This marks the slowest sales pace for April since 2009 and reflects a 2% drop compared to the same month last year. Market expectations had anticipated a 2.7% increase, but the outcome fell short. These figures are based on closed contracts, which were likely signed in February and March—before mortgage rates climbed in April.
Despite the broader economy adding around seven million jobs over the past three years, home sales have remained at roughly 75% of pre-pandemic norms. Housing demand continues to build up but remains largely untapped, and economists point to mortgage rates as the key barrier. Any meaningful decrease in borrowing costs could unlock this pent-up demand, providing a boost to the sluggish housing market.
Meanwhile, housing inventory is beginning to improve. Listings rose 9% from March and were up nearly 21% year over year. As of the end of April, there were 1.45 million homes on the market, representing a 4.4-month supply at the current sales pace. This is the highest inventory level in five years but still falls short of the six-month threshold that denotes a balanced market. In April 2023, supply stood at 3.5 months.
The increase in supply is starting to moderate home prices. The median price of an existing home sold in April was $414,000, up 1.8% compared to the previous year. While this represents the highest April price on record, it is the slowest rate of annual price growth since July 2023. Some regions, including the South and West, even experienced price declines, signaling a potential shift in market dynamics.
Despite broader market weakness, the luxury segment remains resilient. Sales of homes priced above $1 million climbed nearly 6% from the previous year, though the momentum appears to be softening—potentially due to recent volatility in financial markets. By contrast, sales of more affordable homes, priced between $100,000 and $250,000, dropped just over 4%. While the high-end market maintains some strength, its growth rate is tapering.
Market conditions suggest that while it is still technically a mild seller’s market, buyers now have more leverage. With the highest inventory in several years, buyers are better positioned to negotiate terms, even as affordability challenges persist. Homes spent an average of 29 days on the market in April—faster than the previous month but longer than the same time last year. First-time buyers made up 34% of transactions, consistent with last year’s numbers.
Another indicator of market strain is the rise in cancellation rates. Approximately 7% of contracts were canceled in April, a noticeable increase from the typical range of 3% to 4%. As economic uncertainty lingers and interest rates remain elevated, the housing market continues to tread cautiously, awaiting more favorable conditions to reignite broader activity.
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