Sales of previously owned homes in the United States experienced a slight uptick in May, although the overall market remained constrained due to high mortgage rates and limited inventory, according to data released by the National Association of Realtors (NAR).
In May, contract closings increased by 0.2%, reaching a seasonally adjusted annual rate of 4.3 million units. However, compared to the previous year, sales were down by over 18% on an unadjusted basis, highlighting the challenges faced by the housing market. One of the primary factors affecting home sales is the impact of high mortgage rates, discouraging potential buyers and hindering existing homeowners from listing their properties. The median selling price of homes declined by 3.1% from the previous year, standing at $396,100.
Meanwhile, the number of homes for sale continued to dwindle, falling by 6.1% from the previous year to a total of 1.08 million units. That’s the lowest inventory level for any May in data back to 1999. These figures are coherent with results found by Redfin.
This inventory shortage, combined with high mortgage rates, has redirected buyers towards new properties, resulting in an increase in homebuilder sentiment and new construction.
The supply-demand imbalance is evident in the inventory levels. At the current pace of sales, it would take only three months to sell all the properties on the market, indicating a tight market condition. A closer look reveals that 74% of homes sold were on the market for less than a month, with properties spending an average of 18 days in the market in May.
*Bottom line: While the market continues to grapple with supply constraints and higher mortgage rates, the slight growth in existing home sales provides a glimmer of hope. The housing sector’s recovery relies heavily on addressing these challenges, which will require increased inventory levels and more favorable mortgage conditions to support homebuyers and sellers alike.
