The spring selling season is off to a rough start.
Existing home sales fell again last month, and the culprit isn't a lack of interested buyers.
According to the National Association of Realtors, sales of previously owned homes slipped 2.7% from the prior month to a seasonally adjusted annual rate of about 4.0 million.
That's well below the roughly 5.5 million pace considered normal before the pandemic.
Pending sales, which track contracts signed but not yet closed, have also sagged.
The core problem is affordability, and it's squeezing from both sides.
The median existing-home price is hovering near $400,000, up roughly 40% in four years.
At the same time, the average 30-year fixed mortgage rate has been parked near 7%, more than double where it sat in 2021.
Run the numbers on a typical loan and the pain is obvious.
A buyer putting 20% down on a $400,000 home at 7% faces a principal-and-interest payment around $2,130 a month.
Three years ago, with a 3% rate on a cheaper home, that same payment was closer to $1,350.
That's an extra $780 every month, before taxes, insurance, and repairs.
For sellers, the flip side is a trap of their own.
Most current owners locked in rates under 4%.
Trading a 3.5% mortgage for a 7% one on a similarly priced home can add hundreds of dollars a month.
Many simply stay put, which keeps inventory historically thin and props up prices even as demand cools.
First-time buyers are getting hit hardest.
They don't have equity to roll into a down payment, and they're competing for a small pool of starter homes that investors and cash buyers often snap up.
In many markets, the entry-level segment is the most competitive and the least available.
There's a slow shift worth watching, though.
Inventory has been creeping up in parts of the South and Southwest, where building boomed and prices ran hottest.
More sellers are cutting list prices, and some are offering to pay closing costs or buy down the buyer's rate.
That's a sign the market is rebalancing, not crashing.
Meanwhile, the Federal Reserve's rate decisions ripple straight into your monthly payment.
Even if the Fed cuts its benchmark rate, mortgage rates don't move in lockstep.
They track the 10-year Treasury and investor expectations, which can swing on a single inflation report.
Anyone waiting for a dramatic drop could be waiting a while.
If you're buying, get pre-approved before you shop so you know your real ceiling, not your dream number.
Budget for property taxes and insurance, which have jumped in many states.
And don't stretch to the max just because a lender says you qualify.
If you're selling, price realistically from day one.
Overpriced listings sit, go stale, and eventually sell for less than a sharp initial number would have fetched.
If you're staying put, a refinance only makes sense when rates fall far enough to beat your closing costs, so run the break-even math first.
Our take: this isn't a broken market, it's an expensive one, and expensive markets move slowly.
The standoff between locked-in sellers and priced-out buyers won't break until rates or incomes shift meaningfully.
Final Thoughts
Until then, patience and realistic numbers will beat wishful thinking every time.