Existing home sales in the US have hit a 30-year low, with May showing very little movement. The National Association of Realtors (NAR) reported that sales were down 0.7% from April, resulting in a seasonally adjusted, annualized rate of 4.11 million units. Compared to May of last year, sales fell 2.8%.
One of the factors contributing to sluggish sales is the high mortgage rates. In April, the average rate for a 30-year fixed loan was just below 7%, rising to just over 7.5% by mid-April. While it has since settled back slightly, the rate currently stands at around 7%. Lawrence Yun, the chief economist at the NAR, expressed surprise at the lack of recovery in home sales, stating, “I thought we would see a recovery this spring. We are not seeing it.”
Regionally, sales remained unchanged month-to-month in all areas except the South, where they fell by 1.6%. However, the most significant change in May was the increase in the inventory of homes for sale. The number of homes on the market rose by 6.7% compared to the previous month and was 18.5% higher than in May of the previous year. Despite this increase, inventory remains low compared to demand.
The high demand for homes has resulted in record-high prices. The median price of an existing home sold in May was $419,300, a 5.8% increase compared to the previous year. This gain marks the strongest increase since October 2022, with prices rising in all regions.
However, it is worth noting that the median price is skewed towards the higher end. Sales of homes priced below $250,000 were lower than a year ago, while sales priced between $250,000 and $500,000 saw only a 1% increase. On the other hand, sales priced between $750,000 and $1 million were up by 13%, and sales priced over $1 million saw a nearly 23% increase.
Cash purchases accounted for 28% of sales, indicating that cash is still king in the real estate market. First-time buyers made up 31% of sales, a slight increase from the previous year. Despite the high prices, two-thirds of homes went under contract in less than a month, showcasing the strong competition in the market.
While some well-priced homes are selling quickly, an increasing number of listings are becoming stale. This suggests that if a home is priced appropriately and requires minimal work, it will sell faster than others that have been on the market for a longer period.
Looking ahead, Lawrence Yun believes that increased housing supply will help boost home sales and slow down price gains in the coming months. A greater inventory of houses will provide more options for consumers, allowing them to make more informed purchasing decisions.
In conclusion, the US housing market is facing challenges with low inventory, high mortgage rates, and increasing prices. However, despite these obstacles, there is still strong demand for homes, particularly in the higher price range. The market remains competitive, with well-priced homes selling quickly. The hope is that increased housing supply will alleviate some of these challenges and provide a more balanced market in the future.
