Even though property sales slow down, sky-high housing prices continue to rise. This shows how difficult it is for most people in this economy to purchase a home. According to the National Association of Realtors, Tuesday's median sale price of a previously occupied house rose to $407.600. NAR reported that this is a jump of nearly 15% over the previous year, and an all-time high going back to 1999.
The same time, existing home sales slowed for the fourth consecutive monthly month. House-hunters are feeling the pinch from record-high mortgage rates and high prices. According to the NAR, sales fell 3.4% from April to an adjusted annual rate of 5.41million.
The pace of home sales has fallen to its lowest point since June 2020 when they ran at an annualized rate 4.77 million homes.
Lawrence Yun, NAR Chief Economist, stated that home sales had essentially returned to 2019 levels - before the pandemic. This was after two years of gangbuster performance.
Housing, an important part of the economy is slowing. Homebuyers are facing steeply higher home financing prices than they did a year ago due to a sharp rise in mortgage rates. The Federal Reserve raised its key rate by three quarters of a point last week to combat inflation. This was the largest one-week jump in U.S. long-term mortgage rates in 35 years.
According to Freddie Mac, the average rate for a 30-year mortgage rose to 5.78% last Wednesday, the highest since November 2008 when the housing crisis was growing. As it attempts to cool down the U.S. economy, the Fed signaled that it will continue to hike its short-term interest rate.
Yun stated to the Associated Press that today's mortgage rates were at 6%. "Given these conditions, I expect further falls in home sales."
NAR data revealed that the sale of low-priced homes is falling the fastest, which indicates the price pressures facing middle- and lower-income buyers.
"Sales of high-priced homes are stable, but sales of lower priced homes are declining as higher interest rates push more buyers out of this market," Bill Adams (chief economist at Comerica Bank) stated in an email.
Some real estate trends favored buyers last month. The number of properties on the market increased by 12.6% in May, as is usual for this time of the year. There were 1.16 million properties available to sell at the end of May. This was 12.6% more than April but 4.1% less than April last year.
The NAR stated that even with the current pace of sales, there is a 2.6 month supply of properties for sale. This is an increase of 2.2 months in April and 2.5 months last year. This is still below the 4-month supply, which reflects a more balanced marketplace between sellers and buyers.
Yun predicts that the inventory of homes available for sale will surpass levels from last year by autumn.
Some economists have adjusted their 2022 housing market outlook due to this year's dip in home sales. Realtor.com now expects that U.S. home sales are going to decline by 6.7% compared with last year. According to Danielle Hale (Realtors.com's chief economist), this would make 2022 the second best year for home sales after 2007 and 2021.
Despite higher mortgage rates making it more difficult to afford homes, they didn't stay on market for very long. The NAR tracked the fastest pace of home sales, which was 16 days on average. In April, it was 17 days.
Inflation at an all-time high of four decades, rising mortgage rates and a tight supply of homes for purchase make homeownership less affordable, particularly for first-time buyers.
The NAR reported that 27% of transactions were made by first-time buyers, a decrease from 28% in the previous month and 31% last May.
NAR reported that 25% of sales in April were made by real estate investors and buyers who can buy a house with cash. This is a decrease from 26% in April.
Irina Ivanova, CBS News reporter, contributed reporting.
