US previously owned home sales rose slightly in May to a still-sluggish pace that continues to show a housing market constrained by poor affordability.
Contract closings increased 0.8% to an annualized rate of 4.03 million last month, just the second advance this year, according to data released Monday by the National Association of Realtors. That compared with the 3.95 million median estimate in a Bloomberg survey of economists.
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It was the weakest May sales pace since 2009. The resale market, which historically makes up about 90% of total home sales, looks set to languish for the foreseeable future without some letup in financing costs or downturn in prices. Compared with a year ago, existing-home sales were down 4% on an unadjusted basis.
"The relatively subdued sales are largely due to persistently high mortgage rates," NAR Chief Economist Lawrence Yun said in a statement.
Mortgage rates remain stuck near 7% and are seen staying above 6% at least through next year, the Mortgage Bankers Association forecasts, and home prices have remained stubbornly high despite some weakening in Sun Belt states. NAR's report showed the median selling price in the South declined 0.7% from a year ago.
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In May, inventory increased 6.2% to 1.54 million houses, the most in nearly five years. Still, the growing number of homes on the market hasn't jump-started home sales, evidenced by the
"We can no longer blame it on the supply," Yun said on a call with reporters about the tepid sales pace. "Supply is showing up, so we can blame it on affordability."
Selling Price
Meantime, the higher supply has failed to bring down prices. The median sales price last month increased 1.3% from a year ago to $422,800, the highest for any May on record, NAR data show. Prices are up 51% from the start of the pandemic five years ago.
Yun noted that the upper end of the market — houses selling for at least $1 million — is no longer outperforming sales of lower-priced houses.
In May, 60% of homes were on the market for less than a month, the same as a month earlier. Some 28% of homes sold for above list price, down from 30% in May of last year.
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By region, previously owned home sales in the South, the country's biggest home-selling region, increased 1.7% to an annualized 1.84 million homes. Sales also rose in the Northeast and Midwest. Contract signings dropped 5.4% in the West to a 700,000 pace, the weakest since the end of 2023.
Yun said Realtors are asking if hedge funds, which make up big share of buyers in Sun Belt states, have been dumping homes on the market lately, causing recent price fluctuations.
Individual investors or second-home buyers purchased 17% of houses last month, compared with 15% in April, and all-cash transactions accounted for 27% of sales, the NAR said. First-time buyers made up 30% of closings in May, showing they "are struggling to get into the market," Yun said.
On Wednesday, the government will release new-home sales figures for May. The data, measured by contract signings, offer a more timely snapshot of housing demand than the existing-home sales figures that are calculated when a contract closes.
