Existing home sales and inventory tick up slightly as prices soften
Numbers are still far below where they were a year ago, and inventory gains are largely due to the "abundant" supply of newly constructed homes.
Key points:
- NAR's monthly report found that existing home sales were up a mere 0.2% between April and May, and down 20.4% year-over-year.
- High mortgage rates and low inventory remain the culprits in today’s skittish housing market.
- The median price of existing homes fell by about 3% nationally, a sign that home prices may be stabilizing.
The National Association of Realtors announced this morning that existing home sales for the month of May were up just 0.2%, representing a seasonally adjusted annual rate of 4.30 million homes sold. But comparing this figure to last year is when the story becomes more clear — existing home sales were down 20.4% in May from the same period last year.
What does this mean? Agents who were hoping for a big summer housing boom may ultimately be in for a summer bust. And while individual markets vary significantly, we're seeing more of the same on a national level: low inventory levels and high borrowing rates suppressing the market.
Inventory did tick up slightly in May, however, increasing by 3.8% from April to 1.08 million listings. That figure represented an overall decline of 6.1% year-over-year, although inventory of new homes remains relatively strong.
"Newly constructed homes are selling at a pace reminiscent of pre-pandemic times because of abundant inventory in that sector. However, existing-home sales activity is down sizably due to the current supply being roughly half the level of 2019," Lawrence Yun, NAR's chief economist said in the announcement.
Bright MLS Chief Economist Lisa Sturtevant attributed the slight bump in existing home sales to lower mortgage rates in April, which "prompted some sidelined buyers to make an offer, closing on those homes in May, and pushing existing home sales up slightly month over month." Sturtevant also pointed to new homes as a key driver of sales: "Right now, new homes account for a record share of the active inventory and are where buyers are often turning for options."
Some much-welcomed news for buyers was that the median price for existing homes dropped just over 3% in the last year, going from $408,600 to $396,100. But all markets are not created equal, as existing home prices increased year-over-year in the Northeast and Midwest by 2.5% and 1.1%, respectively. Prices fell by 2.7% in the South, and the West experienced the largest annual decline at 5.7%.
Cash sales still made up a quarter of all existing home sales in May, which was the same figure as one year ago. However, first-time homebuyers represented only 28% of May sales, which NAR said is near the low of 26% since the association began tracking that data.
But there are reasons to be optimistic, said Danielle Hale, chief economist for Realtor.com. Hale acknowledged that "buyers have a tough road ahead," but pointed to the company's revised 2023 outlook for some positives, "namely, a gradual decline in mortgage rates beginning midyear and a continued softness in home prices that will start to stabilize high housing costs."