Sales of previously owned homes in the U.S. remain at a 30-year low, showing minimal movement in May as home prices reach new highs and mortgage rates stay elevated. According to the National Association of Realtors (NAR), existing home sales in May were essentially flat, declining 0.7% from April to a seasonally adjusted annual rate of 4.11 million units. This marks a 2.8% drop compared to May of the previous year.
This sales count is based on contracts likely signed in March and April, during a period when mortgage rates saw significant increases. The average rate on a 30-year fixed loan began April just below 7% and climbed to over 7.5% by mid-month before slightly decreasing in May. As of now, the rate hovers around 7%.
Lawrence Yun, NAR’s chief economist, expressed disappointment in the stagnant home sales, noting, “Home sales refuse to recover. I thought we would see a recovery this spring. We are not seeing it.” Sales remained unchanged month-to-month in all regions except the South, where they dropped by 1.6%.
A notable change in May was the increase in inventory of homes for sale, which rose by 6.7% month-to-month and 18.5% from the previous year. The current sales pace now provides a 3.7-month supply of homes. Despite this increase, inventory levels are still considered low given the demographic trends and high demand.
Yun suggests that the growing inventory will eventually boost home sales and help moderate price gains. “Increased housing supply spells good news for consumers who want to see more properties before making purchasing decisions,” he added. However, strong demand continues to drive prices higher. The median price of an existing home sold in May was $419,300, setting a record high and showing a 5.8% increase year over year. This was the strongest price gain since October 2022, with all regions experiencing price increases.
The NAR highlighted that the mortgage payment for a typical home today is more than double what it was five years ago, due to both higher rates and increased home prices. Sales of homes priced below $250,000 declined from a year ago, while sales of homes priced between $250,000 and $500,000 saw a modest 1% increase. Homes priced between $750,000 and $1 million rose by 13%, and those priced over $1 million increased by nearly 23%.
Cash purchases accounted for 28% of sales, and first-time buyers made up 31% of sales, up from 28% the previous year. Despite higher prices, competition remains strong, with two-thirds of homes going under contract in less than a month. Real estate brokerage Redfin reports that while some listings are becoming stale, well-priced homes that require minimal work are selling quickly, while others linger on the market longer.
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