Sales of previously owned homes declined for the third straight month in May as prices hit an all-time high. Year-over-year sales were down 2.8%.
According to the National Association of Realtors (NAR), existing home sales dropped 0.7% in May from April to 4.11 million units on a seasonally adjusted annual basis.
Combined with elevated interest rates that have been hovering around 7%, the conditions are leaving homebuyers with affordability challenges that continue to ravage the market.
“I thought we’d see a recovery this spring,” Lawrence Yun, chief economist at the NAR, said during a press call Friday. “We have not seen it.”
Only the Midwest, rated the most affordable region in the country based on several metrics, saw home sales increase. Home sales were flat in three out of four US regions; only the South saw a monthly decline.
Read more: Mortgage rates hover below 7% — is this a good time to buy a house?
A ‘strange phenomenon’ in the market
The inventory of homes for sale increased almost 7% to 1.28 million units in May from the previous month, according to the NAR. The current level is considered a 3.7-month supply, the highest in over four years. Inventory is nearly 19% higher than in the same month to year ago.
“People’s circumstances change,” Yun said. Households wanting to retire in different locations, families with new children needing a bigger house, and workers relocating for new jobs are all reasons homeowners may be listing their homes.
“With time, people just simply cannot live in the same house,” Yun said. Still, inventory remains much lower than in the pre-pandemic era, when available units ranged from 1.8 million to 2.3 million prior to 2019.
The median home price increased by almost 6% annually in May to a record high of $419,300, according to the NAR. Home prices have recorded year-over-year gains for 11 consecutive months. May’s increase also marked the strongest price appreciation since October 2022.
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Properties typically stay on the market for 24 days in May, two days fewer than in April but much higher than last May’s 18 days. While the annual increase indicates a softer market, anything under 30 days is considered a fast turnaround, according to the trade group.
Nearly 1 in 3 homes sold above the listing price and received, on average, between two and three offers.
There’s “somewhat of a strange phenomenon where we have low home sales activity,” Yun said, “[yet] prices hitting record high and homes look like they’re still getting that multiple offer situation.”
For the second straight month, first-time homebuyers’ share of purchases surpassed 30%.
“That shows the resilience of the first-time buyers,” Yun said.
Lack of affordable housing
Sales for homes priced over $1 million increased by 23%, the highest of all price points. By contrast, sales declined 16% and 6% for homes priced under $100,000 and $250,000, respectively.
“It’s not that people are not interested in buying a $200,000 home,” Yun said. “People are very interested [but the] inventory is simply not there.”
The current monthly payment to buy a median-priced home is around $2,200, more than double the pre-pandemic average of $1,000.
“[The] American public are feeling this impact,” Yun said.
Rebecca Chen is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA).
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