According to the National Association of Realtors (NAR), sales of previously owned homes in the U.S. have hit a 30-year low. May saw no significant improvement, with a slight 0.7% decrease from April, resulting in an annualized rate of 4.11 million units.
Compared to May of the previous year, sales dropped by 2.8%. This slow sales pace reflects the impact of rising mortgage rates in April when rates surged from just below 7% to over 7.5% before stabilizing around 7% in May. These higher rates have discouraged potential buyers, contributing to the continued sluggish market.
The lack of recovery in home sales is surprising, as NAR’s chief economist Lawrence Yun had anticipated a spring rebound. Regionally, sales remained unchanged except in the South, where they declined by 1.6%.
Despite the stagnant sales, the inventory of homes for sale increased significantly, with a 6.7% rise from April and an 18.5% increase year-over-year. This has resulted in a 3.7-month supply at the current sales pace, though inventory levels remain low relative to demographic demand.
Rising inventory may eventually aid in boosting home sales and moderating price increases. Yun notes that a greater housing supply is beneficial for consumers because it offers more options before making purchasing decisions.
The median price of an existing home sold in May reached a record high of $419,300, marking a 5.8% year-over-year increase and the strongest gain since October 2022. Prices rose across all regions, reflecting sustained demand that continues to drive prices higher.
Mortgage payments for typical homes have more than doubled compared to five years ago, as both interest rates and home prices have surged by over 50% during that period. The median price is skewing higher, with sales of homes under $250,000 declining while sales of higher-priced homes have increased.
Homes priced between $250,000 and $500,000 saw a modest 1% increase, those priced between $750,000 and $1 million increased by 13%, and sales of homes priced over $1 million rose by nearly 23%.
Despite higher prices, competition remains fierce, with 28% of sales made in cash and first-time buyers accounting for 31% of sales, up from 28% the previous year.
Two-thirds of homes went under contract in less than a month, indicating strong demand for well-priced, move-in-ready properties. However, an increasing number of listings are becoming stale, suggesting that overpriced or less desirable homes are staying on the market longer.
