Sky-high housing prices are hitting new heights even as property sales slow, showing how hard it is for most people to buy a home in this economy. The median sale price for a previously occupied home rose to $407,600 in May, the National Association of Realtors said on Tuesday. That’s a nearly 15% jump from the previous year and an all-time going back to 1999, NAR said.
At the same time, sales of existing homes slowed for the fourth consecutive month, with house-hunters feeling the pinch of climbing mortgage rates and record-high prices. Sales fell 3.4% last month from April to a seasonally adjusted annual rate of 5.41 million, the NAR said.
Mortgage rates in the U.S. jump by most in 35 years
Home sales have fallen to the slowest pace since June 2020, when they were running at an annualized rate of 4.77 million homes.
“Home sales have essentially returned to the levels seen in 2019 – prior to the pandemic – after two years of gangbuster performance,” NAR Chief Economist Lawrence Yun said in a statement.
The housing market, a crucial part of the economy, is slowing as homebuyers facing sharply higher home financing costs than a year ago following a rapid rise in mortgage rates. Average long-term U.S. mortgage rates had their biggest one-week jump in 35 years with the Federal Reserve last week raising its key rate by three-quarters of a percentage point in a bid to combat the worst inflation in 40 years.
The average rate on a 30-year home loan climbed to 5.78% last week, the highest it’s been since November of 2008, as the housing crisis was spreading, according to mortgage buyer Freddie Mac. The Fed has signaled its intention to to keep hiking its short-term rate as it tries to cool off the U.S. economy without causing a recession.
“Today’s mortgage rates are knocking on the door of 6%,” Yun told the Associated Press. “Given those conditions, I do anticipate further declines in home sales.”
Lower-end sales evaporate
NAR’s data showed that sale of the lowest-priced homes are falling the most sharply, indicating the price pressures on middle- and low-income buyers.
“Sales of higher priced homes are holding up, but sales of homes under $500,000 are falling as higher interest rates price more buyers out of the market,” Bill Adams, chief economist for Comerica Bank, said in an email.
Some real estate trends favored buyers last month. As is typical this time of year, the number of homes on the market increased in May from the previous month. Some 1.16 million properties were available for sale by the end of May, up 12.6% from April, but down 4.1% from April last year.
Even so, at the current sales pace, the level of for-sale properties amounts to a 2.6-month supply, the NAR said. That’s up from 2.2 months in April, and 2.5 months a year ago. That’s still short of the 4-month supply that reflects a more balanced market between buyers and sellers.
30-year-fixed mortgages surge over six percent, the biggest one week jump in 35 years
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Yun expects the inventory of homes for sale will be running above year-ago levels by autumn.
This year’s pullback in home sales has led some economists to adjust their housing market outlook for 2022. Realtor.com is now expecting U.S. home sales will decline 6.7% from last year. That would still make 2022 the second-best year for home sales since 2007 behind 2021, according to Danielle Hale, Realtor.com’s chief economist.
Yet even with higher mortgage rates straining affordability, homes that sold didn’t stay on the market for long. On average, homes sold in just 16 days of hitting the market last month, the fastest sales pace tracked by the NAR. It was 17 days in April.
With inflation at a four-decade high, rising mortgage rates, elevated home prices and tight supply of homes for sale, homeownership has become less attainable, especially for first-time buyers.
First-time buyers accounted for 27% of transactions, down from 28% the previous month and 31% in May last year, the NAR said.
Real estate investors and other buyers able to buy a home with just cash, sidestepping the need to rely on financing, accounted for 25% of all sales last month, down from 26% in April, NAR said.
CBS News’ Irina Ivanova contributed reporting.