Sales of previously owned homes declined for the third straight month in May as prices hit an all-time high. Existing home sales dropped 0.7% to 4.11 million units on a seasonally adjusted annual basis, marking a 2.8% year-over-year decrease. The National Association of Realtors (NAR) reported these figures, highlighting the ongoing challenges in the housing market.
With interest rates hovering around 7%, homebuyers are facing affordability issues that are impacting the market. Lawrence Yun, chief economist at the NAR, expressed surprise at the lack of a spring recovery in sales, attributing the slow market to these economic conditions. Only the Midwest region saw an increase in home sales, while the South experienced a decline, and other regions remained flat.
One notable trend is the increase in housing inventory, reaching a 3.7-month supply, the highest level in over four years. Despite this, prices continue to rise, with the median home price reaching $419,300 in May, a nearly 6% annual increase and the strongest price appreciation in months. The market also saw a rise in properties selling above list price, indicating high demand even amidst lower sales activity.
First-time homebuyers have shown resilience, accounting for over 30% of purchases for the second consecutive month. However, the lack of affordable housing options, particularly in the lower price ranges, remains a significant challenge for many prospective buyers. The impact of these market dynamics is felt by the American public, with monthly payment costs more than doubling compared to the pre-pandemic era.
These trends underscore the complexities of the current housing market, where low inventory, high prices, and shifting buyer preferences are shaping the industry landscape. As the market continues to evolve, addressing affordability and supply issues will be crucial to ensuring a more sustainable and inclusive housing market moving forward.
