In May, existing home sales in the U.S. saw an unexpected increase, rising by 0.8% to a seasonally adjusted annual rate of 4.03 million units.
This exceeded economists’ forecasts of a decrease to 3.95 million units, marking the slowest May sales pace since 2009.
The big picture: Despite the increase in sales, there was a 0.7% year-over-year decline in May, highlighting the ongoing challenges in the housing market.
- The sluggish sales are attributed to high mortgage rates, with the average rate on the 30-year fixed-rate mortgage hovering just under 7% throughout the year.
- The Federal Reserve has maintained its benchmark interest rate between 4.25% and 4.50% since December, responding to economic uncertainty caused by tariffs on imported goods.
Go deeper: A survey by the National Association of Home Builders revealed a significant drop in sentiment among single-family homebuilders in June, reaching a 2-1/2-year low. Builders are resorting to price cuts to attract buyers, with expectations of a decrease in single-family starts this year.
- Despite the rise in existing home inventory by 6.2% to 1.54 million units in May, supply surged by 20.3% compared to the previous year. The median price for existing homes also increased by 1.3% year-over-year to $422,800, reaching a record high for the month of May.
- The market balance between supply and demand shifted with the increased inventory, as it would now take 4.6 months to exhaust the current supply of existing homes, up from 3.8 months a year ago.
- Properties remained on the market for an average of 27 days in May, up from 24 days the previous year. First-time buyer participation decreased to 30%, lower than the desired 40% for a robust housing market.
- All-cash sales accounted for 27% of transactions, while distressed sales, including foreclosures, increased slightly from 2% to 3% compared to the previous year.
