(CNN)– Home sales fell for the third straight month in April as rising mortgage interest rates and affordability issues drove many would-be buyers out of the market. Even so, prices continued to rise, reaching an all-time high.
The median home price in April was a record $391,200, up 14.8% from a year ago, according to a report from the National Association of Realtors. Although price growth was solid, it was a slower annual pace of increase than in recent months and determined buyers stretched their budgets to buy a home before mortgage rates rise higher.
The price increase marks more than a decade of consecutive annual increases, the longest such streak on record.
But with the average rate on a 30-year mortgage topping 5% in April, the rising cost of home financing drove some would-be buyers out of the market.
Existing home sales, which include single-family homes, duplexes, condominiums and cooperatives, fell 2.4% from the prior month and 5.9% from a year ago. This represents the weakest sales activity since June 2020.
“Higher house prices and sharply higher mortgage rates have dampened buyer activity,” said Lawrence Yun, chief economist at NAR. “More declines appear to be imminent in the coming months, and we are likely to return to pre-pandemic home sales activity after the notable increase of the past two years.”
Affordability remains a challenge
While listings of available-for-sale homes fell in April, according to the NAR’s tracking of safe deposit boxes, buyer demand remains strong, Yun said. In April, a typical home sold in a very quick 17 days and 88% of homes sold in a month or less.
“The number of households interested in owning a home remains high, despite declining confidence that now is a good time to buy,” said Danielle Hale, chief economist at Realtor.com. “This is especially true among younger homebuyers, who are likely to be first-time buyers and are struggling to save for a down payment as rents continue to break records.”
Affordability remains a challenge for first-time homebuyers, who made up just 28% of the market in April. A year ago, they represented 31% of the market.
But not only are record prices and rising mortgage interest rates making things difficult for buyers, the persistently low supply of homes available to buy continues to weigh on sales.
Inventory increases, but remains low
The inventory of homes for sale increased 10% in April from March, but fell 10.4% from a year ago, according to the NAR.
“Housing supply has started to improve, albeit at an extremely slow pace,” Yun said.
Yun pointed out that the current housing market is in an unusual state. While rising home prices and low days on the market suggest a strong housing market, she said, declines in sales are a sign of weakening.
“Perhaps we are moving from an intense market in which many homes receive multiple offers to a less intense market,” he said. “Transactions are still happening, and they happen quickly, if inventory is available.”
Unfortunately, he said, there is a huge wave of potential inventory that is not being released.
Some homeowners considering selling probably changed their minds in part because they were able to refinance their mortgage at a very low interest rate in the last two years. “They don’t want to give up on super-low mortgage rates,” Yun said.
Although higher rates are expected to eventually curb price increases, homeowners still hold most of the cards.
“Sellers will want to be aware of a market that is adjusting quickly and is primed for a readjustment,” Hale said.