Existing Home Sales Slid Amid Record High Prices

Existing home sales fell for the third straight month in May due to lingering high mortgage rates and record-high prices, according to the National Association of Realtors (NAR). Low resale inventory and strong demand continued to drive up existing home prices, marking the eleventh consecutive month of year-over-year median sales price gains.  However, rising inventory is likely to dampen home price growth in the months ahead.

Homeowners with lower mortgage rates have opted to stay put, avoiding trading in for higher rates. This trend is driving home prices higher and resale inventory lower. Eventually, mortgage rates are expected to decrease gradually, leading to increased demand (and unlocking lock-in inventory) in the coming quarters. However, that decline is dependent on future inflation reports.

Total existing home sales, including single-family homes, townhomes, condominiums, and co-ops, fell 0.7% to a seasonally adjusted annual rate of 4.11 million in May (as shown below). On a year-over-year basis, sales were 2.8% lower than a year ago.

The first-time buyer share fell to 31% in May, down from 33% in April but up from 28% in May 2023. The inventory level rose from 1.20 million in April to 1.28 million units in May and is up 18.5% from a year ago.

At the current sales rate, May unsold inventory sits at a 3.7-months supply, up from 3.5-months last month and 3.1-months a year ago. This inventory level remains very low compared to balanced market conditions (4.5 to 6 months’ supply) and illustrates the long-run need for more home construction.

However, the count of single-family resale homes available for sale is up almost 18% on a year-over-year basis, with a 7.7% gain in May.

Homes stayed on the market for an average of 24 days in May, down from 26 days in April but up from 18 days in May 2023.

The May all-cash sales share was 28% of transactions, unchanged from April but up from 25% a year ago. All-cash buyers are less affected by changes in interest rates.

The May median sales price of all existing homes was $419,300, up 5.8% from last year. This marked the highest recorded price. The median condominium/co-op price in May was up 5.1% from a year ago at $353,300. This rate of price growth will slow as inventory increases.

Existing home sales in May were mixed across the four major regions (as shown below). Sales in the Northeast, Midwest, and West remained unchanged in May, while sales in the South fell 1.6%. On a year-over-year basis, three of the four regions saw a decline in sales, ranging from -1.3% in the West to -5.1% in the South. Sales in the Midwest were up 1.0% from a year ago.

The Pending Home Sales Index (PHSI) is a forward-looking indicator based on signed contracts. The PHSI fell from 78.3 to 72.3 in April. On a year-over-year basis, pending sales were 7.4% lower than a year ago per the NAR data.