T
he US housing market stumbled out of the gate in March, with sales plummeting 5.9% from February to a seasonally adjusted annual rate of 4.02 million units. This decline marks the largest monthly drop since November 2022, when sales fell 6.7%. Economists had expected a pace of 4.12 million units, but the actual number fell short.

    The culprit behind this sluggish start to the spring homebuying season is the stubbornly high mortgage rate, which has hovered near 7% for months. This barrier has kept buyers on the sidelines, making it difficult for them to afford homes. Lawrence Yun, chief economist at the National Association of Realtors, notes that the average cost of a US mortgage has become a significant hurdle for would-be homebuyers.

    As a result, residential housing mobility is currently at historical lows, signaling a troubling possibility of less economic mobility for society. The national median sales price rose 2.7% in March from a year earlier to $403,700, an all-time high for March but the smallest annual increase since August. Home prices have increased on an annual basis for 21 consecutive months.

    The US housing market has been in a sales slump since 2022, when mortgage rates began to climb from pandemic-era lows. Sales of previously occupied US homes fell last year to their lowest level in nearly 30 years. This year's spring homebuying season got off to a slow start, with higher mortgage rates dampening demand.

    Despite an increase in inventory, sales failed to pick up pace. There were 1.33 million unsold homes at the end of March, an 8.1% increase from February. This translates to a 4-month supply at the current sales pace, up from a 3.2-month pace last year. Traditionally, a 5-6 month supply is considered a balanced market between buyers and sellers.

    "I felt that more inventory would lead to more sales, but that's not the case," Yun said. The high mortgage rate remains a significant barrier for homebuyers, making it difficult for them to afford homes and contributing to the sluggish start of the spring homebuying season.