NewsExisting Home Sales Fell in May to Lowest Level in Two Years

Existing Home Sales Fell in May to Lowest Level in Two Years

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New data from the National Association of Realtors (NAR) found that existing home sales fell 3.4% in May to a seasonally adjusted annual rate of 5.41 million. Economists see this news as evidence of a colling real estate market, as May represented the fourth straight month when existing home sales fell. Annually, sales declined by 8.6%. 

Housing Affordability Is Worsening

According to Lawrence Yun, NAR’s chief economist, existing home sales should continue to decline. Yun argues that affordability is the main reason for this trend. “Further sales declines should be expected in the upcoming months given housing affordability challenges from the sharp rise in mortgage rates this year,” Yun argued. 

“Home sales have essentially returned to the levels seen in 2019 – prior to the pandemic – after two years of gangbuster performance,” said Yun. 

NAR reported that the median existing-home sales price was now $407,600, a 14.8% annual increase. Interest rates are also nearing 6.0% on a 30-year fixed-rate mortgage. With skyrocketing sales prices and borrowing costs, more prospective homebuyers can no longer afford to purchase a house, which contributes to declining home sales.

While the higher interest rates are giving the housing market the cooldown it needs, no doubt it’s making homeownership less accessible to average Americans. There is also a national housing shortage of millions of units, leading to inadequate inventory. There were 1,160,000 available housing units for sale in May, a sharp 12.6% increase from April but a modest 4.1% annual decline. 

Despite growing affordability and inventory issues, homeowners who want to cash out and sell their homes won’t have to wait long. Homes on the market are still selling very quickly, as almost 90 percent of listings sold in May were on the market for less than a month. Houses stayed on the market an average of only 16 days, a record low. 

“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 home buyers,” according to Yun.

First-time buyers were responsible for just 27% of all transactions, compared to 31% a year ago. Affordability is a major issue for all prospective buyers. But it is especially challenging for younger Americans and those who have never bought a home.

Sales of Homes and Condos Declined

Sales of both existing single-family homes and condo units declined in May, which Yun believes indicates that more people are moving back to cities after a mass exodus to the suburbs during the pandemic. 

“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,” Yun said.

 

Tyler Williams
Tyler Williams
Tyler graduated from Virginia Commonwealth University in 2017 with a Bachelor's degree in Urban and Regional Studies. Currently based in Los Angeles, he works as a freelance content writer and copywriter for companies in real estate, property management, and similar industries. Tyler's main professional passion is writing about critical issues affecting big and small cities alike, including housing affordability, homelessness, inequality, and transportation. When he isn't working, he usually plans his next road trip or explores new neighborhoods and hiking trails.

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