Lagging Inventory Continues to be a Drag on U.S. Home Sales

Real Estate In-Depth | April 26, 2018

WASHINGTON—Existing-home sales grew for the second consecutive month in March, but lagging inventory levels and affordability constraints kept sales activity below year ago levels, according to the National Association of Realtors.

Total existing-home sales,, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 1.1% to a seasonally adjusted annual rate of 5.60 million in March from 5.54 million in February. Despite last month’s increase, sales are still 1.2% below a year ago.

Lawrence Yun, NAR chief economist, says closings in March eked forward despite challenging market conditions in most of the country. “Robust gains last month in the Northeast and Midwest—a reversal from the weather-impacted declines seen in February – helped overall sales activity rise to its strongest pace since last November at 5.72 million,” said Yun. “The unwelcoming news is that while the healthy economy is generating sustained interest in buying a home this spring, sales are lagging year ago levels because supply is woefully low and home prices keep climbing above what some would-be buyers can afford.”

The median existing-home price for all housing types in March was $250,400, up 5.8% from March 2017 ($236,600). March’s price increase marks the 73rd straight month of year-over-year gains.

“Although the strong job market and recent tax cuts are boosting the incomes of many households, speedy price growth is squeezing overall affordability in several markets—especially those out West,” said Yun.

Total housing inventory at the end of March climbed 5.7% to 1.67 million existing homes available for sale, but is still 7.2% lower than a year ago (1.80 million) and has fallen year-over-year for 34 consecutive months. Unsold inventory is at a 3.6-month supply at the current sales pace (3.8 months a year ago).

According to Freddie Mac, the average commitment rate (link is external) for a 30-year, conventional, fixed-rate mortgage increased for the sixth straight month to 4.44% in March (highest since 4.46% in December 2013) from 4.33% in February. The average commitment rate for all of 2017 was 3.99%.

Properties typically stayed on the market for 30 days in March, which is down from 37 days in February and 34 days a year ago. Fifty percent of homes sold in March were on the market for less than a month.

“Realtors throughout the country are seeing the seasonal ramp-up in buyer demand this spring but without the commensurate increase in new listings coming onto the market,” said Yun. “As a result, competition is swift and homes are going under contract in roughly a month, which is four days faster than last year and a remarkable 17 days faster than March 2016.”’s Market Hotness Index, measuring time-on-the-market data and listings views per property, revealed that the hottest metro areas in March were San Francisco-Oakland-Hayward, CA; Vallejo-Fairfield, CA; Colorado Springs, CO.; Midland, TX; and San Jose-Sunnyvale-Santa Clara, CA.

First-time buyers were 30% of sales in March, which was up from 29% last month but down from 32% a year ago. NAR’s 2017 Profile of Home Buyers and Sellers—released in late 2017—revealed that the annual share of first-time buyers was 34%.

NAR President Elizabeth Mendenhall, a sixth-generation Realtor® from Columbia, MO and CEO of RE/MAX Boone Realty, says the extremely tight inventory in the entry-level segment of the market should greatly benefit homeowners looking to trade up this spring. “First-time buyers continue to make up an underperforming share of the market because there are simply not enough homes for sale in their price range,” she said. “Supply conditions improve in higher up price brackets, which means those trading up should see considerable interest in their home, as well as more listings to choose from during their own search.”

All-cash sales were 20% of transactions in March, which was down from 24% in February and 23% a year ago. Individual investors, who account for many cash sales, purchased 15% of homes in March, which was unchanged from February and down from 18% a year ago.

Distressed sales—foreclosures and short sales—were 4% of sales in March, unchanged from February and down from 6% a year ago. Three percent of March sales were foreclosures and 1% were short sales.

Single-family and Condo/Co-op Sales

Single-family home sales rose inched forward (0.6%) to a seasonally adjusted annual rate of 4.99 million in March from 4.96 million in February, but were 1.0% below the 5.04 million sales pace a year ago. The median existing single-family home price was $252,100 in March, up 5.9% from March 2017.

Existing condominium and co-op sales increased 5.2% to a seasonally adjusted annual rate of 610,000 units in March, but were still 3.2% below a year ago. The median existing condo price was $236,100 in March, which is 4.8% above a year ago.

Regional Breakdown

March existing-home sales in the Northeast jumped 6.3% to an annual rate of 680,000, but were still 9.3% below a year ago. The median price in the Northeast was $270,600, which was 3.3% above March 2017.

In the Midwest, existing-home sales increased 5.7% to an annual rate of 1.29 million in March, but were still 1.5% below a year ago. The median price in the Midwest was $192,200, up 5.1% from a year ago.

Existing-home sales in the South decreased 0.4% to an annual rate of 2.40 million in March, but were 0.4% above a year ago. The median price in the South was $222,400, up 5.7% from a year ago.

Existing-home sales in the West declined 3.1% to an annual rate of 1.23 million in March, but were still 0.8% above a year ago. The median price in the West was $377,100, up 7.9% from March 2017.