Higher mortgage rates cool spring housing market as buyers stay sidelined

The spring housing market is opening with more caution than momentum. Existing-home sales fell 3.6% in March from February, to a seasonally adjusted annual rate of 3.98 million, the National Association of Realtors said, marking the weakest March reading in years and a sign that higher borrowing costs are still throttling demand. March’s median existing-home price rose to $408,800, up 1.4% from a year earlier and a record for the month, underscoring how limited supply continues to keep prices elevated even as sales soften. Mortgage rates remain the biggest drag. Freddie Mac said the average rate on a 30-year fixed mortgage fell to 6.23% in late April, the lowest spring level in three years, but that is still far above the sub-4% rates that fueled the pandemic-era boom and high enough to keep monthly payments out of reach for many first-time buyers. Mortgage News Daily reported the average 30-year rate at 6.32% on Wednesday, showing how quickly borrowing costs can move and why affordability has not improved meaningfully even when rates briefly ease. The pressure is showing up in buyer behavior. The Mortgage Bankers Association said mortgage applications for home purchases jumped 10% in one recent week when rates dipped, and were 14% higher than a year earlier, but those gains have not been enough to restore broad market strength. NAR Chief Economist Lawrence Yun said March home sales were weak and fell short of last year’s pace, citing diminished consumer confidence and slower job growth. Homes also spent more time on the market, with the median rising to 41 days in March from 36 days a year earlier, a sign that buyers have more leverage than they did during the frenzied pandemic market. The market is also splitting by region. High-cost coastal metros, where monthly payments can balloon fastest as rates rise, have been among the hardest hit as buyers step back and sellers adjust expectations. At the same time, inventories have improved in many areas, giving shoppers more options and reducing bidding wars, but not enough to offset the affordability hit from still-high prices and financing costs. Zillow said March contracts rose 4.6% from a year earlier, while active inventory climbed 4.2%, suggesting some re-engagement from buyers and sellers even as overall conditions remain fragile. For now, the spring season looks more balanced than bullish. A small drop in mortgage rates has been enough to bring some buyers back into the market, but not to deliver the relief many had hoped for after three years of historically weak sales. Unless borrowing costs fall more decisively, economists say the housing market is likely to remain stuck in a slow, uneven recovery rather than a full rebound.