Sales of previously owned homes are at a 30-year low and didn't move much in May as prices hit a new high and mortgage rates remained high.
So-called existing home sales in May were essentially flat, down 0.7% from April to a seasonally adjusted annual rate of 4.11 million units, according to the National Association of Realtors, or NAR. Sales decreased by 2.8% compared to May of last year.
This number of closed sales is based on contracts that will likely be signed in March and April. The slowdown in sales came as interest rates rose sharply in April.
The average interest rate on a 30-year fixed loan started the month at less than 7% and then rose to just over 7.5% by mid-April, before leveling off slightly in May, according to Mortgage News Daily. This rate is now about 7%.
“Home sales refuse to recover,” said Lawrence Yun, chief economist at NAR. “I thought we were going to see a rebound this spring. But we're not seeing it.”
Homes in the Isaac Heights area of Isaac, Washington, United States, on Tuesday, April 16, 2024.
David Ryder | Bloomberg | Getty Images
Sales did not change from month to month in all regions except the South, where they decreased by 1.6%.
The biggest change in May is that the inventory of homes for sale jumped, up 6.7% month-over-month and 18.5% higher than in May of last year. At the current sales pace, there is now a 3.7-month supply. While inventory is growing, it is still very low given demographics and demand.
“Ultimately, more inventory will help boost home sales and tame home price gains in the coming months. Increased housing supply bodes well for consumers who want to see more properties before making purchasing decisions,” Yoon added.
Price history
This demand continues to push prices higher. The median price of an existing home sold in May was $419,300, a record price at listing brokers and up 5.8% year over year. The gain was the strongest since October 2022. Prices rose in all regions.
The mortgage payment for a typical home today is more than double what it was five years ago, the brokers noted in a statement. Not only have interest rates risen, but housing prices are 50% higher than they were five years ago. This is partly because the average is skewed toward the higher end.
Sales of homes priced under $250,000 were lower than a year ago, while sales priced between $250,000 and $500,000 were up just 1%. Sales priced between $750,000 and $1 million were 13% higher, and sales priced above $1 million were up nearly 23%.
Cash still reigns supreme, accounting for 28% of sales. First-time buyers account for 31% of sales, compared to 28% the previous year.
Two-thirds of the homes were contracted in less than a month, so competition remains strong despite the high prices. Redfin, a real estate brokerage, reports that an increasing number of listings are outdated, so if a home comes on the market for a good price that doesn't need a lot of work, it sells quickly. Other homes sit longer.
