Existing home sales fell in May as home prices reached a record high

Sales of previously owned homes fell for the third straight month in May, as prices reached all-time highs. Sales decreased year-on-year by 2.8%.

According to the National Association of Realtors (NAR)Existing home sales fell 0.7% in May from April to 4.11 million units on a seasonally adjusted annual basis.

Combined with high interest rates that have been hovering around 7%, the conditions are leaving homebuyers facing affordability challenges that continue to plague the market.

“I thought we were going to see a rebound this spring,” Lawrence Yun, chief economist at NAR, said during a press call on Friday. “We didn’t see that.”

Only the Midwest, which is ranked as the most affordable region in the country based on several metrics, saw an increase in home sales. Home sales were flat in three out of four US regions; Only the South saw a monthly decline.

Read more: Mortgage rates are below 7%, is this a good time to buy a home?

A “strange phenomenon” in the market

The inventory of homes for sale rose nearly 7% to 1.28 million units in May from the previous month, according to NAR. The current level is considered a 3.7-month supply, the highest in more than four years. Inventory is approximately 19% higher than it was in the same month last year.

“People’s circumstances change,” Yoon said. Families who want to retire in different locations, families with new children who need a larger home, and workers who are moving to new jobs are all reasons why homeowners list their homes.

“As time goes by, people simply cannot live in the same house,” Yoon said. However, inventory is still much lower than it was pre-pandemic, when available units ranged from 1.8 million to 2.3 million before 2019.

The median home price rose nearly 6% annually in May to reach a record high of $419,300, according to NAR. Home prices have posted year-over-year gains for 11 straight months. May’s increase also represents the strongest price rise since October 2022.

Properties typically stay on the market for 24 days in May, two days less than in April, but well above the 18 days last May. While an annual increase indicates a softer market, anything less than 30 days is considered a quick turnaround, according to the trade group.

Nearly 1 in 3 homes sold for above list price and received, on average, two to three offers.

There is a “somewhat strange phenomenon where our home sales activity is low,” Yoon said.[yet] “Prices are at record highs and it seems like homes are still getting that multiple offer situation.”

The story continues

For the second month in a row, the share of first-time homebuyers exceeded 30%.

“This shows the resilience of first-time buyers,” Yoon said.

Lack of affordable housing

Sales of homes priced over $1 million increased 23%, the highest of all price points. By contrast, sales were down 16% and 6% for homes priced under $100,000 and $250,000, respectively.

“It doesn’t mean people aren’t interested in buying a $200,000 home,” Yoon said. “People are very interested [but the] The inventory simply isn’t there.”

The current monthly payment for a median-priced home is about $2,200, more than double the pre-pandemic average of $1,000.

“[The] The American public is feeling that impact, Yoon said.

Rebecca Chen is a reporter at Yahoo Finance and previously served as an investment tax certified public accountant (CPA).

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