Sales of existing U.S. homes dropped for the second straight month in March, an industry survey said Wednesday, a sign that higher mortgage rates and rising prices are taking the wind out of the booming sector's sails.
Sales fell 2.7% last month to a seasonally adjusted annualized rate of 5.77 million, which was 4.5% lower than in the same month last year, the National Association of Realtors (NAR) reported.
According to the survey, home prices rose nationwide, and the median price increased to $375,300, a 15% jump compared to March 2021.
The drop in sales pushed supply up to two months at the current sales pace, 11.8% higher than in February.
NAR chief economist Lawrence Yun pointed to the impact of tighter lending conditions and increasing prices across the economy.
"The housing market is starting to feel the impact of sharply rising mortgage rates and higher inflation taking a hit on purchasing power," he said. "Still, homes are selling rapidly, and home price gains remain in the double-digits."
Sales fell in all regions except for the West, where they were flat. The Midwest saw the biggest decline of 4.5%, while in the South they dipped 3%, about the same as the drop in the Northeast.
The Federal Reserve is moving to hike interest rates this year to curb record U.S. inflation, which will have effects across the economy.
Mortgage rates have climbed above 5% and Yun predicted they would rise further, causing existing home purchases to fall 10% this year.
Lydia Boussour of Oxford Economics agreed that low supply and high prices would put downward pressure on sales, though she said they would only fall so far.
"Resilient demand and strong income gains should keep a floor under home sales, however, particularly if home price growth moderates," she said.
