Existing home sales remain at a 30-year low and were quiet in May as prices hit record highs and mortgage rates remained high.
Existing home sales in May were roughly flat at a seasonally adjusted annualized rate of 4.11 million, down 0.7% from April, according to the National Association of Realtors. Sales were down 2.8% from May of last year.
The number of sales is based on deals that likely closed in March and April, with the pace of sales slowing due to a big increase in interest rates in April.
According to Mortgage News Daily, the average interest rate on the popular 30-year fixed loan was just below 7% earlier this month, then rose to just above 7.5% by mid-April before stabilizing slightly in May. Currently, that rate is around 7%.
“Home sales are refusing to recover,” said Lawrence Yun, chief economist at the National Association of Realtors. “We had hoped we would see a recovery this spring, but that hasn’t happened.”
A home in the Issaquah Highlands neighborhood on Tuesday, April 16, 2024 in Issaquah, Washington, USA.
David Ryder | Bloomberg | Getty Images
Sales were unchanged from the previous month in all regions except the South, where they were down 1.6%.
The biggest change in May was a sharp increase in the inventory of homes for sale. It was up 6.7% from last month and 18.5% from May of last year. At the current sales pace, there is only 3.7 months of supply left. Inventory is increasing, but it is still very low given demographics and demand.
“Ultimately, increased inventory will boost home sales and help cap home price increases in the coming months. Increasing housing supply is good news for consumers who want to view more properties before deciding to buy,” Yoon added.
Record prices
This demand continues to drive up prices: The median price for existing homes sold in May was $419,300, the highest price ever recorded by real estate agents and up 5.8% from a year ago. That increase was the highest since October 2022. Prices increased in all regions.
The Realtors Association noted in its announcement that mortgage payments for a typical home today are more than double what they were five years ago. Not only have interest rates risen, but home prices are also more than 50% higher than they were five years ago, in part because median prices are skewed higher.
Sales of homes under $250,000 were down from a year ago, and sales of homes between $250,000 and $500,000 were up just 1 percent. Sales of homes between $750,000 and $1 million were up 13 percent, and sales of homes over $1 million were up nearly 23 percent.
Cash is still king, accounting for 28% of sales. First-time home buyers made up 31% of sales, up from 28% a year ago.
Competition remains strong despite rising prices, with two-thirds of homes going under contract within a month. Real estate brokerage Redfin reports that more homes are backlogged, meaning that affordable, low-maintenance homes are snapping up as soon as they hit the market. Other homes are staying on the market longer.
