The good news? More homes are hitting the market
Existing home sales dipped in May, pushing the inventory of unsold homes to its highest level in nearly two years.
Sales retreated 0.7% from April to a seasonally adjusted annual rate of 4.11 million in May, according to the latest National Association of Realtors (NAR) report. Year-over-year, sales waned by 2.8%. This slowdown pushed the inventory of unsold homes to its highest level in almost two years, at 1.28 million units.
Total housing inventory was up 6.7% from April and 18.5% from one year ago. At the current sales pace, this represents a 3.7-month supply, an increase from 3.5 months in April and 3.1 months in May 2023.
“Home prices reached a record high in May, so it’s no wonder that the pace of existing home sales slowed,” said Holden Lewis, mortgage expert at NerdWallet. “Prospective buyers are inhibited by the combination of high prices and high mortgage rates, which make homebuying unaffordable for many families.
“Slower sales pushed the inventory of unsold homes to its highest level in almost two years. Normally, rising inventory would keep prices in check. But the rise in inventory is concentrated in Florida and Texas, where owners are listing their homes to escape unaffordable home insurance premiums. The buyers in the other 48 states have a limited choice of homes to choose from, thereby pushing prices higher.”
The median existing-home price for all housing types hit $419,300 in May, the highest price ever recorded and a 5.8% increase from a year ago.
“Home prices reaching new highs are creating a wider divide between those owning properties and those who wish to be first-time buyers,” said NAR chief economist Lawrence Yun. “The mortgage payment for a typical home today is more than double that of homes purchased before 2020. Still, first-time buyers in the market understand the long-term benefits of owning.”
The 30-year fixed-rate mortgage averaged 6.87% as of June 20, according to Freddie Mac, down from the previous week but up from 6.67% one year ago.
Read next: Pace of US homebuilding hits lowest level since 2020
While the first half of the year did not meet expectations, CoreLogic chief economist Selma Hepp said there is potential for improvement later in the year.
“Still, if the Fed makes a move in September and mortgage rates fall some, the end of the year could be more promising for home sales,” she said.
Yun remained hopeful that increasing inventory will eventually stabilize home prices and boost sales.
“Eventually, more inventory will help boost home sales and tame home price gains in the upcoming months,” he said.
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