Existing home sales marginally increased in May, but were still down significantly from a year prior, according to the latest report from the National Association of Realtors (NAR).
Total existing home sales rose 0.2% from April to a seasonally adjusted annual rate of 4.30 million in May. Year-over-year, sales dropped 20.4% from 5.40 million in May 2022.
Home sales have been dropping on an annual basis since the Federal Reserve began hiking the benchmark rate in spring of 2022. Mortgage rates have settled into the 6% to 7% range over the last three months, which has led to several consecutive months of consistent, if unimpressive, home sales.
Total housing inventory recorded at the end of May was 1.08 million units, up 3.8% from April, but down 6.1% from May 2022 (1.15 million). Unsold inventory is at a 3.0-month supply at the current sales pace, up from 2.9 months in April and 2.6 months in May 2022, the trade group said.
“Available inventory strongly impacts home sales,” Lawrence Yun, chief economist at NAR, said. “Newly constructed homes are selling at a pace reminiscent of pre-pandemic times because of abundant inventory in that sector. However, existing home sales activity is down sizably due to the current supply being roughly half the level of 2019.”
Though all four regions experienced year-over-year sales declines, the South and West posted month-over-month improvements while sales faltered in the Northeast and Midwest from April. Prices grew in the Northeast and Midwest but fell in the South and West.
Sales in the South rose 1.5% from April to an annualized rate of 2 million; the median price in the South fell to $361,000, down 2.7% from May 2022.
In the West, where affordability challenges and a tech downturn have led to a softer market, existing home sales rose 2.6% from April to an annual rate of 790,000, an overall 25.5% decline from a year ago. Prices in the West came in at $596,500, down 5.7% from May 2022.
Meanwhile, existing home sales in the Northeast declined 2.0% from April to an annual rate of 500,000 in May, down 25.4% from May 2022. The median price in the Northeast was $439,000, up 2.5% from one year ago.
In the Midwest, existing home sales dropped 2.9% from April to an annual rate of 990,000, decreasing 20.8% from the previous year. The median price in the Midwest was $298,000, up 1.1% from May 2022.
The median existing home price in May for all housing types – which includes single-family homes, condos and townhouses – was $396,100, a decline of 3.1% from May 2022 ($408,600). The median existing single-family home price was $401,100 in May, down 3.4% from one year prior.
“Despite the report of prices falling in May, we could be seeing the bottom and prices should be stable or increasing across much of the country in the second half of the year,” said Lisa Sturvetant, chief economist for Bright MLS. “The pace of existing home sales will continue to be slow for the rest of the year, and it is likely we will see total annual home sales down more than 10% compared to last year’s level. Lower mortgage rates and an increase in supply could spur a busier market in 2024.”
Properties typically remained on the market for 18 days in May, down from 22 days in April, but up from 16 days in May 2022. Nearly three-quarters of homes sold in May were on the market for less than a month. First-time buyers were responsible for 28% of sales in May, down from 29% in April, but up from 27% in May 2022.
All-cash sales accounted for a quarter of transactions in May, down from 28% in April and identical to one year ago. Individual investors or second-home buyers, who make up many cash sales, purchased 15% of homes in May, down from 17% in April and 16% the previous year.
To the continuing dismay of housing bears, distressed sales represented just 2% of sales in May, virtually unchanged from last month and the prior year.
Though the existing home sales market is faring poorly, homebuilders have been capitalizing on a lack of competition and injecting supply into the marketplace. New home sales now account for roughly one-third of transactions, and housing starts in May were at one of the highest readings in history.
“This slow flow of new existing home listings coming onto the market is suppressing sales from levels seen a year ago as there are so few homes available to transact, but this spring season is getting back into the normal rhythms of the market and sales have increased from a year ago,” said Nicole Bachaud, a senior economist at Zillow. “Low inventory will continue to keep a hold on this market and suppress overall existing home sales numbers, and thus put pressure on prices and affordability. But thankfully the new construction market is churning out a steady flow of new homes to help fill the gap.”
