WASHINGTON — Sales of existing U.S. homes fell in March after a huge gain the previous month, held back partly by a sharp slowdown among the most expensive properties.
The National Association of Realtors said Monday that home sales fell 4.9% to a seasonally adjusted annual rate of 5.21 million, down from 5.48 million in February. The drop followed an 11.2% gain the previous month, the largest in more than three years.
Home sales are struggling to rebound after slumping in the second half of last year, when a jump in mortgage rates to nearly 5% discouraged many would-be buyers. Spring buying is so far running behind last year’s healthy gains: Sales were 5.4% below where they were a year earlier.
The Midstate region has also seen a slowing of home sales, according to data from the Greater Harrisburg Association of Realtors, albeit on a longer time scale.
Total sales for March were up from February, with 490 homes sold in the Cumberland-Perry-Dauphin tri-county region last month versus 393 in February. But sales this March were weak compared to March 2018, which saw 622 residential sales.
In year-to-date terms, the first quarter of 2019 saw 14.6 percent fewer residential sales in the tri-county market than the first three months of 2018.
Most analysts expect sales to rebound in the coming months. Borrowing costs have fallen back to an average of 4.2% on a 30-year fixed mortgage. And solid hiring is pushing employers to pay higher wages, making it easier for more Americans to afford buying a home.
Applications for mortgages to purchase homes have been running at a healthy pace in recent months, evidence that final sales should pick up in the coming months. Demand remains strong, with homes on the market for an average of 36 days in March, down from 44 in February.
“We look for a combination of strong demand and lower mortgage rates to support modest growth in sales over the balance of the year,” said Nancy Vanden Houten, senior U.S. economist at Oxford Economics.
GHAR data shows the same trend in the Midstate, with median days on market dropping to 31 days for homes sold in March 2019 versus 40 days for homes sold in February 2019. Fewer homes sold, despite a faster-moving market, would indicate that the slowdown is an issue of supply, not demand.
"It’s absolutely the case. It’s an inventory shortage," said Ray “Buz” Wolfe of Wolfe & Co. Realtors in Carlisle. “It’s the same thing we saw last year and is probably more the case this year."
GHAR data shows a total inventory of 1,459 listings last month, versus 1,945 open listings at the same time last year.
Nationally, a split in the market has emerged, thanks partly to the Trump administration’s tax cut law. Sales increased slightly among midpriced homes but fell sharply among homes priced at $1 million or more.
Lawrence Yun, chief economist at the NAR, said tax changes have limited the ability of wealthier homeowners to deduct mortgage interest payments and property taxes. That’s discouraging sales of more expensive homes.
Developers have built more expensive homes in recent years while pulling back from cheaper properties, even as middle-income Americans are eager to buy.
“The lower-end market is hot while the upper-end market is not,” Yun said.
Properties valued at $100,000 or less, mostly condos, also saw a sharp drop in sales, though that reflects a lack of available homes at that price point. The slowdown among higher-priced homes has occurred because of weaker demand.
The price divergence seen nationally is more muted in the Midstate, given the limited number of million-dollar-plus listings in the Harrisburg metro zone relative to larger metro areas in the nation.
Most of the tri-county region’s home sales are in the sub-$200,000 range, according to GHAR data. While the number of homes sold in that price range dropped about 27.6 percent from March 2018 to March 2019, that market also heated up the most, with the average days on market for sub-$200,000 homes dropping from 70 days last March to 54 days for homes sold in March 2019.
At the same time, the overall median home price in the tri-county region jumped from $169,900 to $179,900, according to GHAR data. The accelerating speed of sales and appreciation on the lower end of the market can be attributed to millennials, long shut out of the market due to slow wage growth, finally having enough to buy their first home.
"The millennials are finally entering the market so the entry-level stuff gets gobbled up fast,” Wolfe said. But there’s still too little inventory in the Midstate to satisfy the demand, and no quick fix in sight, he said.
Sales of homes up to $299,000, and sales of homes over $400,000, also showed fewer but faster sales in March 2019 versus a year earlier. However, homes in the $300,000 to $399,000 range saw an increase in sales, from 48 to 58 units, but with a slower average sale time of 71 days in March 2018 versus 80 days in March 2019.
One of the factors that contribute to the tight market locally is that older homeowners who are looking to sell their home and build a new one are finding limited land options and rapidly rising construction costs, and are thus delayed in putting their old home on the market, Wolfe said.
“You have that food chain effect,” Wolfe said. “The bottom is active now, but a lot of the trade-up buyers are reluctant to put their house on the market.”
Sales fell in all four major U.S. regions, with the biggest decline occurring in the Midwest. That may have partly reflected the impact of massive flooding in Iowa, Missouri and Nebraska last month.
The broader U.S. economy is looking much better now than it did a couple of months ago, when the government shutdown, slumping retail sales and slower global growth threatened to drag down the U.S. economy.
Earlier this year, economists forecast growth could fall to as low as 0.5% at an annual rate in the first three months of the year. Now, analysts expect the government on Friday could report growth as high as 2.8%.