Sales of existing homes in the U.S. fell for a third straight month in May and prices set another record, underscoring ongoing affordability issues that have hampered the important spring selling season.
The number of contracts signed fell 0.7% from a month earlier to an annualized rate of 4.11 million, driven entirely by a slowdown in the South, according to National Association of Realtors data released Friday. The figure was in line with the Bloomberg average of economists’ estimates.
Meanwhile, the number of existing homes for sale has increased recently, in part because people who were waiting for rates to drop before putting their homes on the market decided they couldn’t wait any longer.
The supply of homes on the market rose 18.5% from the same month last year to 1.28 million, but that is still well below levels seen before the pandemic, when mortgage rates were much lower.
That explains why prices remain strong, with the average sales price up 5.8% from last year to a record $419,300, reflecting increased sales of high-priced properties as well as multiple offers, NAR data shows.
“Home prices reaching new highs are creating a wider gap between those who own homes and those looking to buy for the first time,” NAR chief economist Lawrence Yun said in a statement. “Ultimately, increased inventory will help boost home sales and moderate home price increases in the coming months.”
Delayed recovery
Mortgage rates have to go down just recently, but the Federal Reserve likely won’t cut interest rates until later this year. Yoon said that could delay a recovery in home sales, which were stuck at an annualized rate of 4 million last year.
At the current rate, it would take 3.7 months for all homes on the market to sell, the highest in four years. Despite this, agents believe that a period of less than five months indicates a tight market.
About 67% of homes sold in May were on the market for less than a month, essentially unchanged from the previous month, and 30% sold above list price. Properties remained on the market an average of 24 days in May, compared with 26 days in April, the NAR report found.
Existing home sales make up the majority of total sales in the United States and are settled at closing. On June 26, the government will release data on new home sales for May.
Dig deeper
- Sales in the South, the largest region, fell for a third month, while sales in the other three major regions were unchanged in May.
- Sales of private homes in May decreased by 0.8%; condominiums and co-ops were flat
- Individual investors or second home buyers purchased 16% of homes in May, the same as the previous month.
- First-time shoppers made up 31% of purchases, down slightly from the month before.
- Sales were down 1% from a year earlier on an unadjusted basis.