#HousingMarket #HomeSales #MortgageRates
Home Prices Soar to Record High in May as Sales Stall
The housing market has reached a critical juncture, with home prices hitting a record high in May while sales remain stagnant. According to the National Association of Realtors (NAR), the median price of an existing home sold in May was $419,300, a 5.8% year-over-year increase. This marks the strongest price gain since October 2022.
Despite the record prices, sales of previously owned homes are at a 30-year low. In May, sales were essentially flat, down 0.7% from April to a seasonally adjusted, annualized rate of 4.11 million units. This represents a 2.8% decline from May of last year.
The sluggish sales pace is attributed to the significant leap in mortgage rates in April. The average rate on the popular 30-year fixed loan started the month at nearly 7% and rose to over 7.5% by mid-April before settling back slightly in May. The current rate stands at around 7%.
Lawrence Yun, chief economist at the NAR, expressed disappointment at the lack of recovery in home sales. "I thought we would see a recovery this spring. We are not seeing it." Sales were unchanged month to month in all regions except the South, where they fell 1.6%.
One positive development is the increase in the inventory of homes for sale, which jumped 6.7% month to month and 18.5% higher than in May last year. This brings the current supply to a 3.7-month level. While inventory is still low, it is expected to eventually boost home sales and moderate price gains.
The demand for homes continues to drive prices higher, with the median price of an existing home sold in May reaching a record high. The gain was the strongest since October 2022, with prices increasing in all regions. Notably, the mortgage payment for a typical home today is more than double what it was five years ago, due to both rate hikes and a 50% increase in home prices over the same period.
Sales patterns reveal that homes priced below $250,000 were lower than a year ago, while those between $250,000 and $500,000 were up just 1%. In contrast, sales of homes priced between $750,000 and $1 million were 13% higher, and those over $1 million were up nearly 23%. Cash purchases accounted for 28% of sales, while first-time buyers made up 31% of sales, up from 28% the year before.
Despite higher prices, competition remains strong, with two-thirds of homes going under contract in less than a month. Well-priced homes that require minimal work are selling quickly, while others are sitting longer on the market.
Original Article: https://www.cnbc.com/2024/06/21/home-prices-hit-record-high-in-may-as-sales-stall.html
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