Despite a modest uptick in home sales, uncertainty continues to cloud the housing market. Elevated mortgage rates and economic headwinds may be leaving some would-be home buyers hesitant, even as the inventory of for-sale homes improves and buyers find they have more negotiating power in some markets.
Existing-home sales—completed transactions for single-family homes, townhomes, condos and co-ops—eked out a slight increase in May compared to April, up 0.8%, but remained down 0.7% compared to a year ago, the National Association of REALTORS® reported Monday. The tepid sales activity comes during what is typically a busy time for real estate.
“The relatively subdued sales are largely due to persistently high mortgage rates,” says Lawrence Yun, NAR’s chief economist. “Lower interest rates will attract more buyers and sellers to the housing market.” The 30-year fixed-rate mortgage averaged 6.81% last week, according to Freddie Mac, and rates have hovered in the mid- to high-6% range for several weeks, straining some buyers’ budgets.
Yun says if mortgage rates decrease in the second half of the year, he would expect home sales nationwide to respond quickly, given strong income growth, improving housing inventory levels—up 20% from a year ago—and a record-high number of jobs.
Prices Still Rising, But Moving at a Slower Pace
For home sellers, home prices continue to increase, with the median existing-home sales price in May at $422,800, up 1.3% year-over-year, NAR’s latest report shows. It marks a record high for home prices for the month of May. Higher prices in the resale market are putting existing-home prices more in line with newly built home prices, which one economist recently noted is an “unprecedented” shift.
But the pace of price increases is cooling slightly, which could be welcome news to home shoppers. “There’s certainly more price reductions from the list price now,” Yun recently said in an interview with Real Estate Today. “But we are still at record high home prices. Price appreciation is greatly slowing down. It is no longer 10% to 15% price appreciation. It is more like 2%, 3% or 4% in many markets,” which is a healthier pace.
Yun notes that income growth is about 4% annually, so slower price appreciation will help ensure home prices do not consistently outpace income growth.
“For those who are financially able, it may be an opportune time to get into the market,” given the increase in inventories and slowdown in price increases, Yun says.
Competition Persists in Some Markets
Still, home buyers should expect to face some competition. The median time on the market for properties was 27 days in May, a brisker pace than 29 days on the market in April. According to the latest REALTORS® Confidence Index Survey, based on responses from over 1,500 real estate professionals:
- 60% of homes sold in less than one month
- 28% of homes sold above list price
- Homes received an average of 2.5 offers
- 25% of buyers waived the inspection contingency
- 24% waived the appraisal contingency
Cash buyers remain a force in the housing market, too—increasing competition among buyers. NAR’s report says 27% of real estate transactions in May were all-cash, whether from investors or move-up buyers leveraging recent home equity.
Regional Snapshot
Existing-home sales rose in the Northeast, Midwest and South last month, while falling in the West. Here’s a closer look at how existing-home sales fared in May across the country, according to NAR’s report:
- Northeast: Existing-home sales rose 4.2% in May compared to April, reaching an annual rate of 500,000. Sales were up 4.2% compared to a year ago. Median price: $513,300, up 7.1% from a year ago.
- Midwest: Sales rose 2.1% last month, settling in at an annual rate of 990,000. Existing-home sales were up 1% compared to a year ago. Median price: $326,400, up 3.4% from a year ago.
- South: Existing-home sales rose 1.7% in May to an annual rate of 1.84 million. Sales, however, were down 0.5% compared to a year ago. Median price: $367,800, down 0.7% compared to May 2024.
- West: Home sales fell 5.4% in May to an annual rate of 700,000. Sales were also down 6.7% compared to a year ago. Median price: $633,500, up 0.5% compared to a year ago.
