Skyrocketing home prices are reaching new heights, even as home sales slow, showing how difficult it is for most people to buy a home in this economy. The median sale price of a previously occupied home rose to $407,600 in May, the National Association of Realtors said on Tuesday. That’s a nearly 15% jump from the previous year and a record since 1999, NAR said.
At the same time, existing home sales slowed for the fourth month in a row, with home hunters feeling the pinch ofand record prices. Sales were down 3.4% last month from April to a seasonally adjusted annual rate of 5.41 million, NAR said.
Home sales fell to the slowest pace since June 2020, when they were operating at an annualized rate of 4.77 million homes.
“Home sales have essentially returned to levels seen in 2019 – before the pandemic – after two years of rock-bottom performance,” NAR chief economist Lawrence Yun said in a statement.
The housing market, a crucial part of the economy, is slowing as homebuyers face much higher home financing costs than they were a year ago following a rapid rise in mortgage rates. Average U.S. long-term mortgage rates had their biggest one-week jump in 35 years, with the Federal Reserve raising its base rate last week byin an attempt to fight the worst inflation in 40 years.
The average rate on a 30-year home loan, the highest since November 2008, as the housing crisis raged, according to mortgage buyer Freddie Mac. The Fed has signaled its intention to continue raising its short-term rate as it tries to cool the US economy without causing a recession.
“Today’s mortgage rates are knocking at the door of 6%,” Yun told the Associated Press. “Given these conditions, I predict further declines in home sales.”
Low-cost sales evaporate
NAR data showed that lower-priced home sales are falling more sharply, indicating price pressures on middle- and low-income buyers.
“Higher priced home sales are holding up, but sales of homes below $500,000 are falling as higher interest rates drive more buyers out of the market,” said Bill Adams, chief economist at Comerica. Bank, by email.
Some real estate trends favored buyers last month. As is typical at this time of year, the number of homes on the market increased in May from the previous month. About 1.16 million properties were available for sale by the end of May, up 12.6% from April but down 4.1% from April last year.
Even so, at the current pace of sales, the level of properties for sale equates to a 2.6-month supply, NAR said. That’s up from 2.2 months in April and 2.5 months a year ago. This is still short of the 4 month supply which reflects a more balanced market between buyers and sellers.
Yun expects the inventory of homes for sale to be above last year’s levels by the fall.
This year’s downturn in home sales has prompted some economists to adjust their housing market outlook for 2022. Realtor.com now expects US home sales to drop 6.7% from last year. That would still make 2022 the second-best year for home sales since 2007, behind 2021, according to Danielle Hale, chief economist at Realtor.com.
However, even with higher mortgage rates putting pressure on affordability, homes sold did not remain on the market for long. On average, homes sold in just 16 days after they hit the market last month, the fastest pace of sales tracked by NAR. It was 17 days in April.
With inflation at a four-decade high, mortgage rates soaring, high home prices and a tight supply of properties for sale, home ownership has become less affordable, especially for first-time homebuyers.
First-time buyers accounted for 27% of transactions, up from 28% a month ago and 31% in May last year, NAR said.
Real estate investors and other homebuyers able to buy a home with just cash, avoiding the need to rely on financing, accounted for 25% of all sales last month, down from 26% in April, NAR said.
Irina Ivanova of CBS News contributed reporting.