Home Sales Are Down 22% From a Year Ago. Does That Make This a Good Time to Buy?

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Should you buy a home now that demand seems to be weaker? Read on to find out. 

There was a point in 2021 when listed homes would sell within hours of hitting the market. That’s because record-low mortgage rates fueled a major surge in buyer demand.

But buyer demand has cooled off a bit this year — largely due to the fact that mortgages have been more expensive to sign. And home sale figures have been slipping as a result.

In March, existing home sales fell 2.4% from a month prior and 22% from a year prior, according to the National Association of Realtors (NAR). And if you’ve been looking to buy a home, you might assume that now’s a good time to pounce.

But is it? That’s questionable.

Buyers might continue to struggle

While it’s true that these days, you may not face the same steep competition on the home-buying front that you would’ve faced in 2021, today’s housing market is hardly buyer-friendly. For one thing, real estate inventory is still extremely low. As of the end of March, there were only 980,000 housing units for sale per the NAR. That represents a 2.6-month supply.

But it can easily take a six-month supply of homes for there to be enough properties on the market to meet buyer demand. So clearly, we’re a ways off from there.

Low inventory, however, creates two distinct problems. First, it gives sellers the upper hand when negotiating.

Now, it’s worth noting that in March, the median existing home sale price dropped 0.9% from a year prior to $375,700. But that doesn’t mean homes are suddenly inexpensive. And if sellers get multiple offers on a given home, they get plenty of leeway to demand a higher price for it.

Also, low inventory means that you might struggle to find a home that’s suitable for you and your family. You may want a few extra bedrooms to accommodate a larger number of children. If there are only six homes for sale in your target neighborhood when there would normally be 20, you might struggle to find the type of property you’re looking for.

Higher mortgage rates aren’t helping

On top of low inventory and higher home prices, buyers today face the challenge of elevated mortgage rates. Rates have been hovering in the 6% range for 30-year loans since the start of the year, and there’s a good chance they’ll be largely stuck in that zone for the remainder of 2023.

Historically, a 30-year loan in the 6% range isn’t such a terrible deal. The problem is that many buyers are used to seeing lower rates. And when you’re signing a loan in the 6% range and are also paying a premium for the home you’re buying because your seller can get away with charging more, it creates an affordability crunch.

That’s why a dip in existing home sales shouldn’t necessarily drive you to buy a home in the near term. While there are definite benefits to homeownership, it could at least pay to wait until housing inventory picks up before making a move.

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