A “For Sale” sign outside a house in Albany, California, on Tuesday, May 31, 2022.
David Paul Morris | Bloomberg | Getty Images
Existing home sales in May fell 3.4% to a seasonally adjusted annual rate of 5.41 million units, according to the National Association of Realtors.
Sales are 8.6% lower than in May 2021. April sales have been revised down slightly as well.
This is the weakest reading since June 2020, which was during the early months of the pandemic. Adjustment for it, is the lowest since January 2020.
This reading is based on closings during the month and therefore represents contracts likely to be signed in March and April. During that time, the average 30-year fixed-rate mortgage rate has risen from about 4% to 5.5%. It is currently around 6%, according to Mortgage News Daily. Rising prices, combined with a rapid rise in housing prices and a persistently low supply, have tripled affordability.
“I expect a further decline in home sales,” said Lawrence Yun, chief economist at the National Association of Realtors. “The impact of higher mortgage rates was not fully reflected in the data.”
There were 1.16 million homes for sale at the end of May, up 12.6% month over month but still down 4.1% from May 2021. At the current sales pace, that’s 2.6 months of supply.
Decreased supply continued to push home prices higher. The median price of a home sold in May was $407,600, a 14.8% increase from May 2021. That’s the highest price ever since brokers began tracking it in the late 1980s.
Supply is less low at the lower end of the market, which is likely why activity there continues to be weak compared to the higher end. Sales of homes between $100,000 and $250,000 are down 27% from a year ago. Sales of homes between $750,000 and $1 million were up 26%. Sales of homes over $1 million are up 22% year over year.
Homes are selling quickly. Homes stayed on the market with an average of just 16 days, the lowest on record for brokers. All cash sales remained high at 25% of total sales. Investors made up 16% of all trades, down slightly from April and from last year.
First-time buyers made up just 27% of all transactions, down from 31% a year ago. Affordability obviously affects them severely, as rents are also rising.
“Higher short-term Fed rates are helping to reset much-needed housing — a real estate update,” wrote Danielle Hill, chief economist at Realtor.com. “While rebalancing is necessary, it increases the challenge of navigating the housing market for both sellers and buyers as expectations and conditions adjust quickly.”
Realtor.com recently updated its forecast for home sales in 2022, and now expects fewer numbers this year than last year.