Economy
US Existing Home Sales Decline for Third Straight Month in May Amid Record High Prices
Jun
Sales of existing homes in the US fell for the third straight month in May, underscoring the persistent affordability challenges that dampened the crucial spring selling season. Contract closings decreased by 0.7% from April, hitting an annualized rate of 4.11 million, driven solely by a downturn in the South, as per data from the National Association of Realtors (NAR) released on Friday. This figure was in line with the median estimate in a Bloomberg survey of economists.
Rising Inventory
The inventory of homes available for sale has seen a gradual increase recently. This rise is partly due to homeowners, who had been waiting for mortgage rates to decrease, deciding they could no longer delay listing their properties. The supply of homes on the market increased by 18.5% compared to the same month last year, reaching 1.28 million. However, this is still significantly below pre-pandemic levels when mortgage rates were much lower.
Increased home inventory reflects homeowners reacting to market conditions despite rates remaining higher than pre-pandemic, according to Barron’s Print Edition.
Record-High Prices
The limited inventory is driving up prices. The median sales price surged 5.8% year-over-year to a record $419,300. This increase is attributed to more transactions involving high-priced properties and multiple offers, according to NAR’s data.
“Home prices reaching new highs are widening the gap between current homeowners and prospective first-time buyers,” observed NAR Chief Economist Lawrence Yun. He further mentioned that increased inventory expected in the coming months will support higher home sales. This, in turn, should moderate home price growth over time.
US consumer spending stalled in May amid economic challenges.
In May, consumer spending in the United States experienced a lackluster period, as economic pressures weighed heavily on American households.
Delayed Recovery
Yun believes recent small drops in mortgage rates won’t lead the Federal Reserve to cut interest rates soon. He thinks this delay could hinder the rebound in home sales, which have maintained a steady annualized rate of 4 million.
At the current pace, it would take 3.7 months to sell all homes on the market, the longest duration in four years. Nevertheless, anything below five months is considered indicative of a tight market by agents.
Market Dynamics
In May, approximately 67% of homes sold were on the market for under a month, matching April’s data. About 30% sold above the listed price. Homes typically sold in 24 days in May, down from 26 days in April, as per the NAR report.
Outlook
Existing homes sales dominate US housing market data, reported upon contract closure. The government will release new-home sales data on June 26. This will provide insights into the housing market’s health amid affordability and inventory challenges.
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