US existing home sales rise in May; mortgage rates still a constraint

Yahoo

5 days ago

WASHINGTON (Reuters) -U.S. existing home sales unexpectedly increased in May, but the trend remained weak amid high mortgage rates.
Home sales climbed 0.8% last month to a seasonally adjusted annual rate of 4.03 million units, the National Association of Realtors said on Monday. Economists polled by Reuters had forecast home resales falling to a rate of 3.95 million units.
The sales pace was the slowest for the month of May since 2009.
Sales fell 0.7% on a year-over-year basis in May.
"The relatively subdued sales are largely due to persistently high mortgage rates," said Lawrence Yun, the NAR's chief economist. "If mortgage rates decrease in the second half of this year, expect home sales across the country to increase."
The average rate on the popular 30-year fixed-rate mortgage has hovered just under 7% this year. President Donald Trump's aggressive tariffs on imported goods have heightened uncertainty over the economy, which the Federal Reserve has responded to by pausing its interest rate cutting cycle.
The U.S. central bank last week kept its benchmark overnight interest rate in the 4.25%-4.50% range, where it has been since December. Fed Chair Jerome Powell told reporters he expected "meaningful" inflation ahead due to the import duties.
A National Association of Home Builders survey on Tuesday showed sentiment among single-family homebuilders plummeted to a 2-1/2-year low in June. The NAHB reported an increase in the share of builders cutting prices to lure buyers, and forecast a decline in single-family starts this year.
Residential investment, which includes homebuilding and home sales, contracted slightly in the first quarter after rebounding in 2024 following steep declines in the prior two years caused by a surge in mortgage rates.
The inventory of existing homes increased 6.2% to 1.54 million units in May. Supply surged 20.3% from a year ago.
The median existing home price rose 1.3% from a year earlier to $422,800 in May, an all-time high for the month.
At May's sales pace, it would take 4.6 months to exhaust the current inventory of existing homes, up from 3.8 months a year ago. A four-to-seven-month supply is viewed as a healthy balance between supply and demand.
Properties typically stayed on the market for 27 days last month compared to 24 days a year ago.
First-time buyers accounted for 30% of sales, down from 31% a year ago. Economists and realtors say a 40% share is needed for a robust housing market.
All-cash sales constituted 27% of transactions, down from 28% a year ago. Distressed sales, including foreclosures, made up 3% of transactions, up from 2% a year ago.