Key Takeaways
Hopes for a robust spring recovery in the U.S. housing market were dashed Monday, as sales of previously owned homes were nearly flat in April. The market’s key selling season is shaping up to be a bust after an oil price shock sent mortgage rates climbing and sidelined potential buyers.
"The oil-price shock essentially messed that up," Lawrence Yun, chief economist for the National Association of Realtors, said. With rates rising since February, "that has hit the momentum, potential momentum, to recovery."
Sales of existing homes rose just 0.2% from the prior month to a seasonally adjusted annual rate of 4.02 million, the NAR reported. The slight gain reverses a revised 2.9% drop in March but fell far short of the 3% increase that economists surveyed by The Wall Street Journal had forecast. The weakness stems from a jump in mortgage rates, which climbed to 6.37% last week after falling below 6% in February.
The market stagnation suggests a significant slowdown in a real estate sector that had been counting on a strong spring to emerge from a slump of more than three years. The disappointing data complicates the Federal Reserve's policy decisions as it weighs slowing growth against persistent inflation, which has been exacerbated by rising oil prices stemming from the war in Iran. The conflict has pushed Brent crude to over $100 a barrel, impacting fuel-sensitive businesses from retail to transport, as seen in stock declines for companies like Dollar General and United Airlines.
Real-estate agents and mortgage lenders are now bracing for another slow year. Buyer sentiment has soured due to concerns over still-high home prices and job market stability, making them hesitant to commit to a purchase. The current environment points to a repeat of the last three spring selling seasons, which were largely considered busts, and dims the outlook for a meaningful housing recovery this year.
This article is for informational purposes only and does not constitute investment advice.
