Sales of existing homes in the United States have hit a 30-year low, with little movement in May. The National Association of Realtors reported a 0.7% drop in sales from April, totaling an annualized rate of 4.11 million units. This trend indicates a 2.8% decrease compared to May of the previous year. The sluggish sales can be attributed to high mortgage rates and a record-high median home price of $419,300 in May.
One significant change in May was the increase in the inventory of homes for sale. The supply of homes jumped by 6.7% month-to-month and was 18.5% higher than the previous year. Despite the rise in inventory, the current sales pace equates to a 3.7-month supply, which is relatively low considering the level of demand in the market. Chief Economist Lawrence Yun believes that a surge in inventory will eventually help boost home sales and moderate price increases in the coming months.
The median price of existing homes reached a record high in May, rising to $419,300, marking a 5.8% increase year-over-year. This surge in prices was uniform across all regions. Notably, homes priced above $750,000 saw a significant uptick in sales, with properties priced over $1 million experiencing a 23% increase in sales. The prevalence of cash transactions, accounting for 28% of sales, reflects the competitive nature of the market.
First-time buyers, comprising 31% of sales, have shown resilience in the face of rising prices. However, affordability remains a challenge, especially for homes priced below $250,000. Sales in this price range declined compared to the previous year, indicating a growing disparity in the market. With two-thirds of homes going under contract in less than a month, buyers face fierce competition despite escalating prices.
The real estate market is characterized by a dichotomy, where well-priced properties in good condition sell rapidly, while others linger on the market. Consumers benefit from increased housing supply, as it provides more options and potentially moderates price growth. However, the market dynamics suggest that affordability concerns persist, with mortgage payments doubling over the past five years due to rising rates and home prices.
The real estate market in the U.S. presents a challenging landscape for both buyers and sellers. While inventory levels are rising, demand remains strong, propelling prices to record highs. The imbalance between supply and demand underscores the need for strategic planning and informed decision-making in navigating the complexities of the current market conditions.
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