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U.S. existing-home sales saw an unexpected, slight uptick in May, increasing by 0.8% month-on-month to a seasonally adjusted annual rate of 4.03 million units. However, the pace remains historically slow for this time of year, the weakest May performance since 2009. High mortgage rates, ranging between 6.6% and 6.9%, continue to strain affordability, especially for first-time buyers who only made up 30% of transactions. Inventory rose over 20% from a year ago to 1.54 million homes, while the median price hit a record USD 422,800. Despite more listings, affordability and borrowing costs remain key concerns for buyers and sellers alike.
U.S. existing-home sales registered a modest but unexpected rise this past week, climbing 0.8% in May to a seasonally adjusted annual pace of 4.03 million units, according to the National Association of Realtors (NAR). The gain beat market expectations, which had predicted a dip to around 3.95 million, yet it still marked the slowest May sales rate in over 15 years. Advertisement
The housing market remains under pressure from persistently high mortgage rates, which largely stayed between 6.6% and 6.9% throughout the month hovering just below the critical 7% level. These elevated borrowing costs continue to restrict affordability, particularly for first-time buyers, who accounted for just 30% of total sales, far below the 40% level considered healthy for market balance.
Inventory levels, on the other hand, showed a notable improvement. The number of homes available for sale jumped 6.2% from April and surged more than 20% compared to the same period last year, reaching 1.54 million units. This translated to a 4.6-month supply, moving closer to the five- to six-month range that generally signals a balanced market between buyers and sellers.
Home prices also reached new heights. The median price for existing homes sold in May rose to USD 422,800 a record high for that month and up 5.8% from April. Year-on-year, the price gain was more modest at 1.3%, reflecting a cooling in price appreciation compared to the rapid increases seen during the pandemic years. However, affordability remains strained. A household now needs an annual income of nearly USD 92,000 to afford a typical home, up significantly from pre-pandemic benchmarks.
Additionally, homes stayed on the market for an average of 27 days, slightly longer than the 24-day average recorded in May 2023, signalling more negotiation room for buyers. Cash sales also declined to 27% of transactions, while the share of distressed sales, including foreclosures and short sales, edged up to 3%.
Sellers and homebuilders have begun adapting to the shifting dynamics. Many are adjusting list prices, offering buyer incentives, or covering closing costs to attract hesitant buyers. Though homebuilder sentiment has softened in recent weeks, the increased inventory both new and existing may gradually ease some pricing pressure in the coming months.
According to NAR chief economist Lawrence Yun, elevated mortgage rates are still holding back broader sales momentum. He indicated that any decline in borrowing costs later this year could re-energise demand, especially among sidelined first-time buyers.
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