Sales of U.S. Previously Owned Homes Fall to Lowest Since 2020

Sales of previously owned U.S. homes fell in March to the lowest since June 2020 as historically low inventory paired with rising mortgage rates curbed purchases.

Contract closings decreased 2.7% in March from the prior month to an annualized 5.77 million, figures from the National Association of Realtors showed Wednesday. The figure was in line with estimates in a Bloomberg survey of economists.

“The housing market is starting to feel the impact of sharply rising mortgage rates and higher inflation taking a hit on purchasing power,” Lawrence Yun, NAR’s chief economist, said in a statement.

Long constrained by a lack of inventory and high prices, home buyers must now also contend with decades high inflation and rapidly rising mortgage rates -- now over 5% for the first time since 2018. With the Federal Reserve intent on bringing inflation under control, borrowing costs are set to climb further in the months ahead.

Given contracts usually take about a month or two to close, the data precedes the latest jump in borrowing costs.

The NAR data showed that the number of homes for sale increased from a month earlier, which is typical for this time of year, but were still 9.5% lower than a year earlier. At the current pace it would take two months to sell all the homes on the market. Realtors see anything below five months of supply as a sign of a tight market.

Home builders are racing to meet demand with new construction, but high materials costs, elongated delivery times and ongoing challenges finding skilled labor have inflated backlogs. That mismatch in supply and demand has put upward pressure on prices.