Existing home sales declined sharply in March, a sign that the 6% mortgage rates of earlier this year did little to bring buyers back into the market.
And homebuying conditions are arguably worse now: Rates are higher, inflation is up, and general uncertainty is weighing on the economy.
Home sales dropped 3.6% month over month in March to a seasonally adjusted annual rate of 3.98 million, and they are down 1% from a year ago, according to National Association of Realtors (NAR) data released on Monday. Economists had expected a far smaller monthly decline of 0.7%.
Homes that sold in March likely went under contract in February or late January. Back then, mortgage rates were near multiyear lows, but the drop might not have lasted long enough to bring buyers back to the market in a meaningful way, said Lawrence Yun, the NAR’s chief economist.
“My own personal belief is that mortgage rates need to remain low for several months before buying activity really picks up,” Yun said. Glum consumer sentiment and a weakening job market may also have sidelined buyers, he said.
Read more: When will mortgage rates go down again?
Citing a weak start to the year and rising rates since the Iran war began, the NAR slashed its 2026 home sales forecast to a 4% gain, down from 14%.
Last month, sales were down from February in all parts of the country.
Prospective homebuyers were likely also deterred by limited inventory, which helped push prices higher despite weak demand. 1.36 million homes were available for sale in March, up 2.3% from last year, but still far below pre-pandemic norms.
“I would like to see inventory grow 20% or 30%, but it’s not happening,” Yun said. Another 200,000 to 400,000 units would give buyers more “elbow room” and allow them to take time with their searches, he added.
Going forward, the data looks discouraging. Mortgage rates have risen sharply since the Iran war began in late February, averaging 6.37% last week. Sales that occurred after the war began will begin showing up in next month’s numbers.
Claire Boston is a Senior Reporter for Yahoo Finance covering housing, mortgages, and home insurance.
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