May home sales barely move as high mortgage rates, prices, weigh on housing market
Existing home sales rose 0.8% last month from April to a seasonally adjusted annual rate of 4.03 million units, the National Association of Realtors said Monday.
Sales fell 0.7% compared with May last year. The latest home sales fell topped the 3.95 million pace economists were expecting, according to FactSet.
'The sluggish sales activity one can attribute essentially to affordability,' said Lawrence Yun, NAR's chief economist.
Home prices increased on an annual basis for the 23rd consecutive month, although the rate of growth continued to slow. The national median sales price rose 1.3% in May from a year earlier to $422,800, an all-time high for the month of May.
The U.S. housing market has been in a slump since early 2022, when mortgage rates began to climb from pandemic-era lows. Home sales fell last year to their lowest level in nearly 30 years.
The average rate on a 30-year mortgage has remained relatively close to its high so far this year of just above 7%, which it set in mid-January, according to mortgage buyer Freddie Mac. The low point for this year arrived five weeks ago, when the average rate briefly dropped to 6.62%. Last week, it averaged 6.81%.
Homes purchased last month likely went under contract in April and May, when the average rate on a 30-year mortgage ranged from 6.62% to 6.89%.
High mortgage rates, which can add hundreds of dollars a month in costs for borrowers, remain a key affordability hurdle for many would-be homebuyers. Years of soaring home prices have helped put homeownership out of reach. The median U.S. home sales price is up 52% since May 2019, while the U.S. median annual income has risen 30% in the same period, Yun noted.
While price growth has slowed, elevated mortgage rates and rising prices are forcing prospective homebuyers to save more for a down payment. In May, buyers needed an annual income of $91,960 to afford a typical home with a 20% down payment, or nearly 87% more than in May 2019, according to Realtor.com.
Home shoppers who can afford to buy at current mortgage rates benefited from a wider selection of properties on the market.
There were 1.54 million unsold homes at the end of last month, a 6.2% increase from April, and 20.3% higher than May last year, NAR said. That's still well below the roughly 2 million homes for sale that was typical before the pandemic, however.
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