Following strong existing-home sales gains posted in February, numbers were due for a retreat in March, and new data from the National Association of Realtors (NAR) confirmed the decline.
Existing-home sales sank 8.5% month over month in March to a seasonally adjusted annual rate of 5.27 million units. Sales did remain up year over year, posting an 0.8% increase from March 2019; the gain made March the ninth straight month in which sales grew annually. Still, the monthly decline was larger than some economists expected. According to Wells Fargo Securities’ Economics Group, it was the largest decline since November 2015.
All four regions tracked by the NAR saw monthly existing-home sales decreases, with the West seeing the hardest hit with a 13.6% tumble from February. Sales dropped 9.1% in the South, 7.1% in the Northeast and 3.1% in the Midwest.
“Unfortunately, we knew home sales would wane in March due to the coronavirus outbreak,” said Lawrence Yun, NAR’s chief economist. “More temporary interruptions to home sales should be expected in the next couple of months, though home prices will still likely rise.”
“Today’s data are the first definitive signal on just how much the nation’s widespread business shutdowns, social distancing measures and general fear and uncertainty are weighing on home sales during the initial phase of the U.S. coronavirus outbreak,” echoed Zillow economist Matthew Speakman on the company’s blog.
And March sales data reflects transactions agreed upon in late January and February, even before the economy began feeling the full brunt of coronavirus’ effects. This likely portends even larger declines in the near-term, with Yun telling CNBC that sales could backslide as much as 30-40% in the months ahead.
“Even before stay-at-home orders became widespread in mid-March, plunging equity markets and mounting recession fears likely sidelined some potential buyers,” affirmed Wells Fargo economists in the company’s latest home sales commentary. “April will show a much more precipitous decline, as it was extremely difficult to show a home and listings plummeted.”
Total housing inventory at the end of March was at 1.50 million units, up 2.7% from February but down a steep 10.2% from March 2019. Many sellers pulled their properties from listings at the end of the month, wary of prospective buyers potentially carrying pathogens into their homes.
“Earlier in the year, we watched inventory gradually tick upward but with the current quarantine recommendations in place, fewer sellers are listing homes, which will limit buyer choices,” said Yun. “Significantly more listings are needed and more will come on to the market once the economy steadily reopens.”
Unsold inventory is currently at 3.4 months given the current sales pace, up from three months in February, but down from 3.8 months in March last year.
The ongoing lack of inventory is keeping price growth strong, with March’s median existing home price at $280,600, up 8% from the same month last year. March’s annual price growth makes it the 97th consecutive month of year-over-year existing-home price increases.