US Markets
Friday, June 21st, 2024 2:59 pm EDT
Key Points
- Record-Low Home Sales: Sales of previously owned homes hit a 30-year low in May, remaining almost flat compared to April, with a slight 0.7% decrease, and down 2.8% from the previous year, influenced by high mortgage rates around 7%.
- Rising Home Inventory: Despite the low sales, the inventory of homes for sale increased by 6.7% from April and 18.5% year-over-year, leading to a 3.7-month supply. This increase in supply is expected to eventually help boost sales and stabilize home prices.
- Record-High Home Prices: The median price of existing homes sold in May reached a record high of $419,300, up 5.8% from the previous year. Sales of higher-priced homes ($750,000 and above) saw significant increases, while sales of lower-priced homes ($250,000 and below) declined.
In May, sales of previously owned homes remained at a 30-year low, reflecting minimal change from April as record-high prices and elevated mortgage rates continued to stifle the market. According to the National Association of Realtors (NAR), existing home sales saw a marginal decline of 0.7% from April, amounting to a seasonally adjusted annual rate of 4.11 million units. Compared to the previous year, sales were down 2.8%. These figures are based on closed sales from contracts likely signed in March and April, a period marked by a significant rise in mortgage rates.
The average rate for a 30-year fixed mortgage hovered around 7% in early April, climbed to over 7.5% mid-month, and then slightly decreased in May. This high-rate environment contributed to the sluggish home sales, with NAR’s chief economist, Lawrence Yun, expressing disappointment over the lack of a spring market recovery.
Regionally, sales remained flat except in the South, where a 1.6% decline was noted. A significant development in May was the jump in housing inventory, which increased by 6.7% month-over-month and 18.5% year-over-year, leading to a 3.7-month supply at the current sales pace. Despite this increase, inventory levels are still low relative to demographic demand. Yun suggested that the growing inventory could eventually help boost sales and stabilize price increases, offering consumers more options in the market.
The demand pressure continues to drive home prices upward, with the median price of an existing home sold in May reaching a record $419,300, a 5.8% increase from the previous year and the highest annual gain since October 2022. This price surge reflects broader market trends, where the median home price has more than doubled compared to five years ago due to rising interest rates and a skew towards higher-end properties.
Sales trends varied significantly across different price ranges. Homes priced below $250,000 saw a decline in sales compared to the previous year, whereas homes priced between $250,000 and $500,000 saw a modest 1% increase. Higher-priced homes experienced more substantial gains, with sales of properties priced between $750,000 and $1 million rising by 13%, and those over $1 million increasing by nearly 23%.
Cash purchases remained prevalent, accounting for 28% of all sales. First-time buyers constituted 31% of the market, up from 28% a year earlier. Despite the high prices, competition among buyers persisted, with two-thirds of homes going under contract in less than a month. However, the market showed signs of cooling for less competitively priced listings, as reported by real estate brokerage Redfin. Well-priced homes requiring little work sold quickly, while other properties lingered longer on the market.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/06/21/home-prices-hit-record-high-in-may-as-sales-stall.html
