As markets across the country have cooled thanks to rising mortgage rates and higher home prices, existing home sales fell in May for the fourth consecutive month. The seasonally adjusted sales rate for existing homes fell 3.4% to 5.41 million from April, according to a report from the National Association of REALTORS® released Tuesday.
The sales pace is down 8.6% compared to a year ago.
“Home sales have essentially returned to the levels seen in 2019 — prior to the pandemic — after two years of gangbuster performance,” said Lawrence Yun, NAR’s chief economist, according to a statement. “Also, the market movements of single-family and condominium sales are nearly equal, possibly implying that the preference toward suburban living over city life that had been present over the past two years is fading with a return to pre-pandemic conditions.”
Thanks to the slowing sales pace, the inventory of unsold existing homes rose 12.6% from April to 1.16 million homes, or the equivalent of 2.6 months of supply at the current sales pace. While inventory is down 4.1% compared to a year ago, the supply is slightly above the 2.5 months of supply recorded in May 2021.
While the median existing home sales price continued to show year over year growth in May, reaching $407,600 and marking 123 consecutive months of increases, the 14.8% annual price gain was the same as a month prior. It also marked the first time the median home sales price was greater than $400,000.
Those higher prices, combined with rising mortgage rates, make conditions especially challenging for first-time homebuyers. In May, first-time buyers made up 27% of all sales, down from 28% in April and 31% a year ago. Although mortgage rates don’t affect cash buyers, the share of cash buyers dropped from 26% in April to 24% in May. In addition, the share of individual investors and second home buyers, also decreased from 17% in April to 16% in May.
However, homes continue to sell quickly. Properties typically remained on the market for 16 days in May, down one day from April 2022 and May 2021. Meanwhile, 88% of homes sold in May were on the market for less than a month, the same as in April.
Regionally, existing home sales rose month over month in the Northeast (1.5%), but fell in the South (2.8%), Midwest (5.3%) and the West (5.3%). Compared to a year ago, every region saw a decrease in existing home sales, with the West seeing the largest decrease at 10%.
“Further sales declines should be expected in the upcoming months given housing affordability challenges from the sharp rise in mortgage rates this year,” Yun said in a statement. “Nonetheless, homes priced appropriately are selling quickly and inventory levels still need to rise substantially — almost doubling — to cool home price appreciation and provide more options for homebuyers.”