U.S. Home Sales Decline For Third Month As Record Prices Pose Persistent Affordability Challenges During Key Selling Season

U.S. home sales declined for the third consecutive month in May, as record-setting prices continued to challenge affordability during the important spring selling season.

According to data issued by the National Association of Realtors (NAR), contract closings fell 0.7% to a seasonally adjusted annual rate of 4.11 million, primarily due to a sales downturn in the South. Despite a modest increase in housing inventory, median home prices surged 5.8% from last year to a new high of $419,300, limiting accessibility for potential buyers and exacerbating the divide between current homeowners and first-time buyers.

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"Eventually, more inventory will help boost home sales and tame home price gains in the upcoming months," NAR Chief Economist Lawrence Yun said in a news release. "Increased housing supply spells good news for consumers who want to see more properties before making purchasing decisions."

The number of homes available on the market increased 18.5% to 1.28 million units compared to the same period last year, however, supply remains well below pre-pandemic levels.

The increased supply, however, has not been sufficient to meet the ongoing demand in many areas of the country, especially as mortgage rates begin to stabilize. The average rate on the 30-year fixed mortgage hovered around 7% for most of May, slightly down from its mid-April peak but still much higher than rates seen in previous years. 

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Still, rate stabilization is beginning to bring some hesitant sellers off the sidelines, the NAR said, adding slight relief to a tight market.

The rapid pace of sales reflects that. More than two-thirds of homes that sold in May were on the market for less than a month. Competition remains stiff; despite the challenges posed by high prices and interest rates, 30% of properties sold above their list price, indicating that bidding wars are still common.

"Home prices reaching new highs are creating a wider divide between those owning properties and those who wish to be first-time buyers," Yun said in the news release. "The mortgage payment for a typical home today is more than double that of homes purchased before 2020. Still, first-time buyers in the market understand the long-term benefits of owning."

First-time buyers were responsible for over 30% of sales last month, the NAR said, which is down slightly from April, but up 28% from May last year.

Regionally, sales were mixed. In the Northeast, existing home sales totaled 480,000, unchanged from April but down 4% from the previous year, while the median home price rose to $479,200.

Sales in the Midwest remained stable at an annual rate of one million units, a slight increase of 1% from last year, while the median sales price increased to $317,100.

Home sales in the South decreased to an annual rate of 1.87 million, falling 1.6% from April and 5.1% year-over-year, while the median price was $374,300.

Sales in the West were steady month-over-month but decreased 1.3% year-over-year to an annual rate of 760,000 units, while prices rose to $632,900.

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