Existing-Home Sales Decline for Third Straight Month as Prices Reach Record High

Existing-Home Sales Drop Again, Prices Hit Record High

Sales of existing-home in the United States continued their downward trend in May, marking the third consecutive month of decline, while prices surged to an unprecedented high. This trend underscores the ongoing affordability challenges that have stymied the crucial spring selling season.

Decline Driven by Southern Market

According to data released by the National Association of Realtors (NAR) on Friday, contract closings fell by 0.7% from April. This resulted in an annualized rate of 4.11 million homes. A decrease in the Southern market solely drove this downturn, aligning with the median forecast from a Bloomberg survey of economists.

Inventory Increase Amid Rising Rates

In the meantime, the inventory of homes available for sale has been gradually increasing. Many homeowners, weary of waiting for interest rates to drop, have decided to list their properties despite the high rates. This has led to an 18.5% increase in the supply of homes on the market compared to May of last year, bringing the total to 1.28 million. Nevertheless, this figure remains significantly below pre-pandemic levels when mortgage rates were much lower.

Soaring Prices Reflect Supply Constraints

The limited supply of homes is a key factor behind the continued rise in prices. The median sales price climbed 5.8% year-over-year to a record $419,300. According to NAR data, this surge occurs because a higher proportion of sales involve expensive properties and competitive bidding situations.

“Record-high home prices are widening the gap between current homeowners and aspiring first-time buyers,” said NAR Chief Economist Lawrence Yun. “Increased inventory in the future should boost home sales and moderate price gains over the coming months.”

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Mortgage Rates and Market Stagnation

Although mortgage rates have slightly eased recently, analysts do not expect the Federal Reserve to lower interest rates until later this year. Yun noted that this delay might be contributing to the stagnation in Existing-home sales. Home sales have hovered around an annualized rate of 4 million for the past year.

Market Tightness Despite Increased Supply

At the current sales pace, it would take 3.7 months to sell all the homes currently on the market, the highest level in four years. Nonetheless, a market is generally considered tight if this duration lasts less than five months. In May, homes that sold within a month of being listed accounted for about 67%. This figure remained steady compared to April. Additionally, 30% of sales closed above the asking price. According to the NAR report, homes stayed on the market for an average of 24 days in May. Which was slightly down from 26 days in April.

Looking Ahead: New-Home Sales Data

Existing-home sales, which comprise the bulk of the U.S. housing market, occur when buyers finalize contracts. The government will release new-home sales figures for May on June 26, offering further insights into the housing market’s performance and potential future trends.

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