The housing market in the United States is currently facing some significant challenges, with sales of previously owned homes hitting a 30-year low. In May, existing home sales were essentially flat, dropping by 0.7% from the previous month to a seasonally adjusted annualized rate of 4.11 million units. This marks a 2.8% decrease from the same time last year. These sluggish sales are a result of a combination of high mortgage rates and soaring home prices. Lawrence Yun, the chief economist at the National Association of Realtors, expressed disappointment in the lack of recovery in the housing market, noting that he had anticipated a rebound in sales during the spring.
One of the most notable changes in the housing market in May was the significant increase in the inventory of homes for sale. Inventory rose by 6.7% from the previous month and was 18.5% higher than it was at the same time last year. Despite this growth in inventory, supply remains low compared to demand. The current sales pace equates to a 3.7-month supply of homes. This imbalance in supply and demand continues to put upward pressure on home prices. The median price of an existing home sold in May hit a record high of $419,300, marking a 5.8% increase year over year. Prices rose in all regions, with the median price now more than double what it was five years ago. This price growth is driven in part by an increase in sales of higher-priced homes, with sales of homes priced over $1 million seeing a nearly 23% increase.
Despite the challenging market conditions, cash buyers continue to play a significant role, accounting for 28% of all home sales. First-time buyers make up 31% of sales, up from 28% the previous year. However, sales in the lower price ranges have seen a decrease, while sales in the higher price ranges have shown growth. Two-thirds of homes are going under contract in less than a month, indicating strong competition in the market. Real estate brokerage Redfin notes that well-priced homes in good condition are selling quickly, while listings that are overpriced or need work are sitting on the market for longer periods.
Looking ahead, the housing market is likely to see some shifts as inventory continues to increase. Lawrence Yun believes that a boost in home sales and a moderation in price gains could be on the horizon as more inventory becomes available. This could provide relief to buyers who have been facing limited options and high prices. However, competition is expected to remain strong, especially for homes that are priced competitively and in good condition. As the market continues to evolve, it will be important for buyers and sellers alike to stay informed and adapt to changing conditions in order to navigate the challenges and opportunities presented by the current state of the housing market in the US.
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