The median existing-home sale price in the U.S. shot above $400,000 in May, setting a record, as the housing market stalled under the weight of higher mortgage-interest rates.
Sales of previously owned homes slid for a fourth straight month, declining 3.4% in May from the prior month to a seasonally adjusted annual rate of 5.41 million, the weakest rate since June 2020, the National Association of Realtors said Tuesday. May sales fell 8.6% from a year earlier.
Home-buying demand continues to exceed supply, buoying home prices to new highs. The median existing-home price rose 14.8% in May from a year earlier to $407,600, a record in data going back to 1999, NAR said.
“The impact of higher mortgage rates have not been fully reflected in the data,” said Lawrence Yun, NAR’s chief economist. “In the upcoming months, I do anticipate a further decline in home sales.”
Economists surveyed by The Wall Street Journal had expected a 3.6% monthly decline in sales of previously owned homes, which make up most of the housing market.
The average rate on a 30-year fixed-rate mortgage was 5.78% in the week ended Thursday, the highest level since 2008 and up from 2.93% a year earlier, according to housing-finance agency Freddie Mac.
Mortgage applications to purchase homes have declined in response to rising rates. Two real-estate brokerage companies said last week they would lay off hundreds of employees due to decreased home-buying demand.
The inventory of homes for sale has risen sharply in some markets. In the Austin, Texas, metro area, active listings in May surged 146% from the prior year, according to the Austin Board of Realtors. In the Denver area, active listings climbed 76% year-over-year in May, according to the Denver Metro Association of Realtors.
Nationally, there were 1.16 million homes for sale or under contract at the end of May, up 12.6% from April and down 4.1% from May 2021, NAR said. At the current sales pace, there was a 2.6-month supply of homes on the market at the end of May.
While demand is slowing, price growth remains rapid. The May figures largely reflect purchase decisions made in April or March. Nearly 60% of homes sold in May were sold above their list price, according to real-estate brokerage Redfin Corp.
Buyers are still making aggressive offers because they are eager to lock in purchases in case interest rates rise further, said Mike Ferrante, a real-estate agent in the Cleveland area. He listed a home in May and got three offers, all over list price and offering favorable terms, he said.
“When you start to see homes sitting on the market for more than a few days, the buyers are going to figure out that the competition is diminishing,” he said. “I do believe there’s going to be a slowdown.”
The typical home sold in May was on the market for 16 days, down from 17 days from the prior month, NAR said.
The spring is often the busiest season for home sales, with 40% of typical existing-home purchases occurring between March and June, according to NAR.
Consumers are feeling pessimistic about the housing market. Only 17% of consumers surveyed by Fannie Mae in May said it was a good time to buy a home, down from 35% a year earlier and a record low in data going back to mid-2010.
Michelle Zuniga said she backed out of a contract to buy a newly built home in LaBelle, Fla., in May after the builder raised the price by $49,500 to account for increased costs. Between the higher price and rising mortgage-interest rates, she could no longer qualify for a loan, she said. Ms. Zuniga is now considering relocating to Georgia for more affordable housing.
“I’m very upset that this happened,” she said. “You feel lost in the sense that I want to move forward, I want to invest, and I’m not able to do that.”
The share of first-time buyers in the market fell to 27% in May, from 31% a year earlier. About 25% of May existing-home sales were purchased in cash, up from 23% in the same month a year ago, NAR said.
Existing-home sales fell the most month-over-month in the West and Midwest, down 5.3% in both regions.
Home builders have been slowed by supply-chain issues and labor shortages. A measure of U.S. home-builder confidence fell in June to the lowest level in two years, the National Association of Home Builders said last week.
“We’ve seen our traffic really drop off,” said George Hale, president of builder Woodhill Homes in Bend, Ore. “As appreciation has gone up and then you add on the factor of rates going up…it’s just become too expensive.”
Housing starts, a measure of U.S. home-building, fell 14.4% in May from April, the Commerce Department said last week. Residential permits, which can be a bellwether for future home construction, dropped 7%.
News Corp, owner of the Journal, also operates Realtor.com under license from NAR.
Via: Nicole Friedman, The Wall Street Journal
