Existing Home Sales Miss Expectations in March

“It is not surprising to see a retreat after a powerful surge in sales in the prior month,” said NAR chief economist Lawrence Yun. “Still, current sales activity is underperforming in relation to the strength in the jobs markets. The impact of lower mortgage rates has not yet been fully realized.”

Housing inventory decreased to 1.68 million from 2.63 million existing homes for sale in February. At the present sales rate, inventory is at a 3.9 month supply, up from 3.6 months in both February and a year ago.

“Further increases in inventory are highly desirable to keep home prices in check,” says Yun. “The sustained steady gains in home sales can occur when home price appreciation grows at roughly the same pace as wage growth.”

NAR says sales of existing homes may be further complicated by tax policy changes affecting the housing sector. “The lower-end market is hot while the upper-end market is not,” said Yun. “The expensive home market will experience challenges due to the curtailment of tax deductions of mortgage interest payments and property taxes.”

“There’s a supply-demand mismatch,” said Jessica Lautz, NAR’s vice president of demographics. “More inventory is needed at the lower end and a price reduction may be needed at the upper end.”