According to the National Association of Real Estate Agents, existing home sales fell 3.4% in May to a seasonally adjusted annual rate of 5.41 million units.
Sales were down 8.6% from May 2021. April sales have also been revised slightly lower.
This is the weakest measurement since June 2020. Covid pandemic.. Adjusting that is the lowest since January 2020.
This reading represents a contract that may have been signed in March and April because it is based on the closing of the month. Meanwhile, the average interest rate on 30-year fixed mortgages has risen from about 4% to 5.5%. According to Mortgage News Daily, it is currently around 6%. Rising interest rates are giving a triple punch to affordability, as home prices continue to rise sharply and supply slumps continue.
“We expect home sales to decline further,” said Lawrence Yun, chief economist at the National Association of Real Estate Agents. “The impact of rising mortgage rates is not yet fully reflected in the data.”
The number of units sold at the end of May was 1.16 million, an increase of 12.6% from the previous month, but a decrease of 4.1% from May 2021. At the current sales pace, it is equivalent to 2.6 months of supply.
Supply shortages continued to push up house prices. The median homes sold in May were $ 407,600, up 14.8% from May 2021. This is the highest price since realtors started tracking in the late 1980s.
Supply is the least sparse at the low end of the market, which may be the reason why activity there remains weaker than at the high end. Home sales, priced between $ 100,000 and $ 250,000, fell 27% from a year ago. Home sales, priced between $ 750,000 and $ 1 million, increased 26%. Home sales over $ 1 million surged 22% year-over-year.
But homes are selling fast. Housing remained on the market for an average of 16 days, the lowest ever for a National Association of Realtors member. Full cash sales still increased by 25% of total sales. Investors accounted for 16% of all transactions, down slightly from April and a year ago.
First-time buyers accounted for only 27% of all transactions, down from 31% a year ago. Affordability is clearly the biggest blow to them, as rents are also rising.
“The Fed’s rise in short-term interest rates has helped drive the long-awaited home rebuilding, or real estate renovation,” said Daniel Hale, chief economist at Realtor.com. “While rebalancing is needed, expectations and conditions are being adjusted rapidly, raising the challenge of navigating the housing market for both sellers and buyers.”
Realtor.com recently updated its 2022 home sales forecast, with less forecasts this year than last year.