Existing home sales tank in May on low supply and affordability

Existing home sales dipped in May for the fourth consecutive month while prices continued to soar, the National Association of Realtors said Tuesday, a signal that depressed inventory means the housing market still isn’t able to keep up with elevated demand.

Total existing home sales in May, the most recent month for which data is available, fell 3.4 percent over April to a seasonally adjusted annual rate of 5.41 million units. From a year earlier, sales sank 8.6 percent.

“Home sales have essentially returned to the levels seen in 2019 – prior to the pandemic – after two years of gangbuster performance,” NAR Chief Economist Lawrence Yun said Tuesday.

Yun said further month-over-month sales declines are expected through the next few months due to inventory and affordability constraints. For the first time since the NAR began collecting data on sales of existing homes, the national median existing home price jumped above $400,000, up nearly 15 percent from one year ago.

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That’s led a growing number of Americans to turn toward renting, NAR President Leslie Rouda Smith said Tuesday, although the price of renting a home in the U.S. has also shot up markedly as demand for housing increases. In May, rents rose by more than 5 percent from a year earlier, the Bureau of Labor Statistics said this month.

But higher prices haven’t shut buyers out of the housing market completely, and home-buying remains exceedingly competitive. As of May, an existing property spent an average of  just 16 days on the market before it was purchased, down from 17 days in April.

Almost 90 percent of homes sold in May this year were on the market for less than a month, according to the NAR.

“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 home buyers,” Yun said Tuesday.

Sales of homes priced at $100,000 and below rose 4 percent in May, according to NAR data, while sales of homes priced at $100,000 to $250,000 were up 20 percent and sales of homes available for $250,000 to $500,000 rose 42 percent.

Monthly sales of existing homes priced at $500,000 to $750,000 rose 19 percent in May, and sales of homes in the $750,000 to $1 million range were up 7 percent. Even sales of homes listed for more than $1 million rose 8 percent in May — an increase of 26 percent over last year.

But inventory levels in nearly every price category remain muted. At the end of May, about 1.2 million units were available for sale, an increase over April but still a 4.1 percent decline over the previous year.

Substantial movement on that front isn’t expected anytime soon. In May, building permits issued for privately owned housing units fell 7 percent over the previous month to a seasonally adjusted annual rate of 1.695 million, according to Census Bureau data released earlier this month.

At the current sales pace, the inventory of existing homes would be depleted in just less than two and a half months, according to the NAR.

Notably, sales of both existing single-family homes and condominiums declined in May, which Yun said could be a sign that more people are moving back to cities and more populated urban areas after retreating to suburban ones at the height of the pandemic.

“The market movements of single-family and condominium sales are nearly equal, possibly implying that the preference towards suburban living over city life that had been present over the past two years is fading with a return to pre-pandemic conditions,” Yun said.

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