Existing home sales drop 3.4% in May
For the fourth month in a row, existing home sales declined in May by 3.4% nationally from the month before. These numbers were down 8.6% from a year ago, according to today’s report from the National Association of Realtors® (NAR). Contract activity represented a seasonally adjusted annual rate of 5.41 million in May, which is starting to reach similar territory to pre-pandemic numbers, which were at an adjusted rate of 5.34 million in May 2019, for example.
"Home sales have essentially returned to the levels seen in 2019 – prior to the pandemic – after two years of gangbuster performance," said Lawrence Yun, Chief Economist at NAR. "Also, 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."
Three of the four regions saw a drop from last month, with only the Northeast ticking up. All four regions were down from last year, however.
- Northeast: up 1.5% to an annual rate of 680,000—9.3% lower than last year
- Midwest: down 5.3% to an annual rate of 1,240,000—7.5% lower than last year
- South: down 2.8% to an annual rate of 2,410,000—8.4% lower than last year
- West: down 5.3% to an annual rate of 1,080,000—10.0% lower than last year
Optimistic signs in unsold inventory
The number of homes available for sale went up in May, a positive sign for the most stubborn issue in the housing market. Low inventory has been an issue holding back homebuyers, and pushing up home prices, since before the pandemic, but May saw a 12.6% uptick from April. This represents a 2.6-month supply of homes for sale at the current pace, the second consecutive month of increases. April’s supply numbers came in at 2.2 months and were at 2.5 months last May.
Despite this positive development, it is fueled in part by a slowing sales pace. Though the 2.6-month supply is higher this year than last, the numbers of units stands at 1,160,000, which is a decline of 4.1% from last year.
Yun believes that "further sales declines should be expected in the upcoming months given housing affordability challenges from the sharp rise in mortgage rates this year. 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."
Home prices burst through the $400,000 ceiling
The drumbeat of rising home prices showed no signs of slowing down in May. The median existing home price in May exceeded $400,000 for the first time ever, coming in at $407,600. That represents a 14.8% increase from one year ago, when the average home price was $355,000. Compare that to the average home price in May of 2019, $277,000 and you can see why so many potential homebuyers are sitting on the sidelines right now.
The region with the largest increase in home values is the West, where the average median price is $633,800. You can find the best value for homes in the Midwest, where the average median price is $294,500. The pace of price appreciation is slowest in the Northeast, with prices rising just 6.7% from last year, while the South has been leading the pack in terms of pace, with home prices jumping 20.6% in the last year alone.