Existing-home sales fell for the fourth straight month in May, sliding to a two-year low as median prices topped $400,000 nationally for the first time ever, according to the National Association of Realtors (NAR).
Total sales ended May at a seasonally adjusted annual rate of 5.41 million, down 3.4% from April and down 8.6% from May 2021. That level of sales is the lowest since June 2020, although it still managed to edge out projections from a Reuters poll of economists, who predicted a pace of 5.40 million units. Single-family home sales decreased to a pace of 4.8 million units, down 3.6% monthly and 7.7% yearly, while sales of condominiums and co-ops slowed to a rate of 610,000 units, down 1.6% monthly and 15.3% yearly.
While the headline declines can be worrisome, the market is still retaining heat — just not at the same scorching levels of the past few years. For-sale listings remain mired in a shortage and properties are still selling rapidly, staying on the market in May for 16 days, a record low. Eighty-eight percent of homes sold in May stayed on the market for less than a month.
And prices continue to grow, with the median existing-home price in May hitting $407,600, up 14.8% year over year. May is the 123rd consecutive month of annual price increases, the longest streak ever recorded by the NAR.
“Home sales have essentially returned to the levels seen in 2019 – prior to the pandemic – after two years of gangbuster performance,” said Lawrence Yun, NAR chief economist. “Also, the market movements of single-family and condominium sales are nearly equal, possibly implying that the preference towards suburban living over city life that had been present over the past two years is fading with a return to pre-pandemic conditions.”
The market continues to lose steam in reaction to dipping affordability and rising mortgage rates, which lingered around 5% throughout May. Rates are only getting higher in the short term, with the Federal Reserve last week hiking its baseline rate by three-quarters of a point in its ongoing fight against rampant inflation. Subsequently, average mortgage rates recently saw their largest weekly jump in 35 years. According to Freddie Mac, the average 30-year fixed rate rose to 5.78% last week — the highest since November 2008.
“Further sales declines should be expected in the upcoming months given housing affordability challenges from the sharp rise in mortgage rates this year,” Yun added. “Nonetheless, homes priced appropriately are selling quickly and inventory levels still need to rise substantially – almost doubling – to cool home-price appreciation and provide more options for homebuyers.”
The ongoing dearth of inventory did see some relief in May, which closed with 1.16 million homes available for sale. That’s up 12.6% from April but down 4.1% from May 2021.