In a sign of renewed momentum, sales of previously owned homes in the United States rose slightly in May. They were up 0.8% over April and up at a SAAR of 4.03 million units. Sales continue to slowly climb, even as they remain below last year’s levels. This housing market downturn speaks to the continued lack of inventory availability largely caused by decidedly stubborn mortgage rates.
For a long time now, the National Association of Realtors (NAR) has been pointing out how these high rates are stifling demand across the board. As a consequence, the market sputters, despite significant increases in some areas. The Northeast region showed the best performance, including a 4.2% month-to-month increase in existing home sales. Sales in the West dropped 5.4%. This steep decline leaves it as the priciest area in the nation for previously owned houses.
Against May of 2022, this is a 0.7% decline in existing home sales. In May, the median price of an existing home shot up to an all-time high of $422,800. That’s a 1.3% increase over the same period last year. That competitive market continues to flourish as 28% of existing homes sold went for over asking price. This number has increased from 18% last month, though still a marginal drop from the 30% seen in May 2024.
Our demand for homes hasn’t let up, driving competition and pushing demand beyond supply. First-time homebuyers only make up 30% of buyers, down from 31% last year. All-cash transactions made up 27% of existing home sales, up from the previous year at this time. Homes are selling faster, on average, 27 days versus 24 days a year ago.
At the end of May, there were only 1.54 million existing homes for sale—about a two-month supply—on the market. This is a phenomenal leap of more than 20% over the same month last year. That equals out to a 4.6-month supply based on today’s pace of sales—which is still very historically light.
Lawrence Yun, NAR’s chief economist, further illustrated how the drastic rise in mortgage rates changed the market.
“The relatively subdued sales are largely due to persistently high mortgage rates. Lower interest rates will attract more buyers and sellers to the housing market,” – Lawrence Yun.
The deeper analysis reveals much more encouraging news. If mortgage rates continue to decrease during the second half of this year, we may see a sizable increase in existing home sales throughout the country. High income growth and healthy locally grown inventories are poised to continue fueling all-time record progress. The record-high number of newly created jobs will further fuel this anticipated growth.