Sales of pre-owned homes fell for a third straight month in May as prices hit an all-time high. Year-over-year sales fell by 2.8%.
According to the National Association of Realtors (NAR), existing home sales fell 0.7% in May from April to 4.11 million units on a seasonally adjusted annual basis.
Combined with high interest rates that have hovered around 7%, conditions are leaving homebuyers with affordability challenges that continue to plague the market.
“I thought we would see a recovery this spring,” Lawrence Yun, chief economist at NAR, said on a press call Friday. “We haven’t seen it.”
Only the Midwest, rated as the most affordable region in the country based on several metrics, saw home sales increase. Home sales were flat in three of four US regions; only the south saw a monthly decline.
Read more: Mortgage rates stay below 7% – is this a good time to buy a home?
A ‘strange phenomenon’ in the market
The inventory of homes for sale rose almost 7% to 1.28 million units in May from the previous month, according to the NAR. The current level is considered a 3.7 month supply, the highest in over four years. Inventory is nearly 19% higher than the same month a year ago.
“People’s circumstances change,” Yun said. Families looking to retire in different locations, families with young children who need a bigger home, and workers relocating for new jobs are all reasons homeowners may list their homes.
“Over time, people just can’t live in the same house,” Yun said. However, inventory remains much lower than in the pre-pandemic era, when available units ranged from 1.8 million to 2.3 million before 2019.
The median home price rose almost 6% annually in May to a record $419,300, according to the NAR. Housing prices have increased from year to year for 11 consecutive months. The May increase also marked the strongest price appreciation since October 2022.
Properties typically sit on the market for 24 days in May, two days less than in April but well up on last May’s 18 days. While the annual increase indicates a softer market, anything under 30 days is considered a rapid turnaround, according to the trade group.
Nearly 1 in 3 homes sold above listing price and received an average of two to three offers.
There is “somewhat of a strange phenomenon where we have low home sale activity,” Yun said, “[yet] Prices are hitting record highs and homes seem like they’re still getting that multiple offer situation.”
For the second month in a row, the share of purchases by first-time buyers exceeded 30%.
“It shows the resilience of first-time buyers,” Yun said.
Lack of affordable housing
Sales for homes priced over $1 million rose 23%, the highest of all price points. In contrast, sales fell 16% and 6% for homes priced under $100,000 and $250,000, respectively.
“It’s not that people aren’t interested in buying a $200,000 house,” Yun said. “People are very interested [but the] the inventory just isn’t there.”
The current monthly payment to buy a median-priced home is about $2,200, more than double the $1,000 average before the pandemic.
“[The] The American public is feeling this impact,” Yun said.
Rebecca Chen is a reporter for Yahoo Finance and previously worked as a certified public accountant (CPA).
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