Existing Home Sales Slid in May

Existing home sales fell for the third straight month in May because of 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 11th consecutive month of year-over-year median sales price gains. However, rising inventory is likely to dampen home price growth in the months ahead.

Home owners with lower mortgage rates have opted to stay put to avoid trading in for higher rates. This trend is driving home prices higher and resale inventory lower. Eventually, mortgage rates are expected to gradually decrease, leading to increased demand and expanded inventory in the coming quarters. However, that decline will depend on future inflation reports.

Total existing home sales in May fell 0.7% to a seasonally adjusted annual rate of 4.11 million - 2.8% lower than a year ago. Meanwhile, the share of first-time buyers fell to 31%, down from 33% in April but up from 28% in May 2023.

Inventory rose from 1.2 million in April to 1.28 million units in May and is up 18.5% from a year ago. At the current sales rate, unsold inventory sits at a 3.7-month supply, up from 3.5 last month and 3.1 a year ago. This inventory level remains very low compared to balanced market conditions (a 4.5- to 6-month supply) and illustrates the long-run need for more home construction.

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.

Fan-Yu Kuo, NAHB senior economist, provides more insights in this Eye on Housing post.