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NAR: National Home Sales Drop 3.4% in May

It’s the 4th month in a row for slowing sales, a drop of 3.4% month-to-month and 8.6% year-to-year – but U.S. is mostly down to 2019 levels after two gangbuster years.

WASHINGTON – Existing-home sales retreated for the fourth consecutive month in May, according to the National Association of Realtors®. Month-over-month sales declined in three out of four major U.S. regions, while year-over-year sales slipped in all four regions.

Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – fell 3.4% from April to a seasonally adjusted annual rate of 5.41 million in May. Year-over-year, sales were down 8.6%.

“Home sales have essentially returned to the levels seen in 2019 – prior to the pandemic – after two years of gangbuster performance,” says NAR Chief Economist Lawrence Yun. “Also, the market movements of single-family and condominium sales are nearly equal, possibly implying that the preference towards suburban living over city life … is fading with a return to pre-pandemic conditions.”

Total housing inventory at the end of May was 1.16 million units, an increase of 12.6% from April and a 4.1% decline from the previous year. Unsold inventory sits at a 2.6-month supply at the current sales pace, up from 2.2 months in April and 2.5 months in May 2021.

“Further sales declines should be expected in the upcoming months given housing affordability challenges from the sharp rise in mortgage rates this year,” Yun says. “Nonetheless, homes priced appropriately are selling quickly and inventory levels still need to rise substantially – almost doubling – to cool home price appreciation and provide more options for homebuyers.”

May’s median existing-home price for all housing types was $407,600, up 14.8% year-to-year ($355,000), with prices increasing in all regions. It marks 123 consecutive months of year-over-year price increases, the longest-running streak on record.

High profile findings

  • Properties typically remained on the market 16 days in May, down from 17 days in April and 17 days in May 2021. Nine out of 10 homes (88%) sold in May 2022 were on the market for less than a month.
  • First-time buyers made up 27% of sales in May, down from 28% in April and down from 31% in May 2021.
  • All-cash sales accounted for 25% of transactions in May, down from 26% in April and up from 23% in May 2021.
  • Individual investors or second-home buyers, who make up many cash sales, purchased 16% of homes in May, down from 17% in April and 17% in May 2021.
  • Distressed sales – foreclosures and short sales – represented less than 1% of sales in May, essentially unchanged from April 2022 and May 2021.

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage was 5.23% in May, up from 4.98% in April. The average commitment rate across all of 2021 was 2.96%.

Single-family and condo/co-op sales: Single-family home sales declined to a seasonally adjusted annual rate of 4.80 million in May, down 3.6% from 4.98 million in April and down 7.7% from one year ago. The median existing single-family home price was $414,200 in May, up 14.6% from May 2021.

Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 610,000 units in May, down 1.6% from April and down 15.3% from one year ago. The median existing condo price was $355,700 in May, an annual increase of 14.8%.

“Declining home purchases means more people are renting, and the resulting rent price escalation may spur more institutional investors to buy single-family homes and turn them into rental properties – placing additional financial strain on prospective first-time homebuyers,” says NAR President Leslie Rouda Smith.

“To counter this trend, policymakers should consider incentivizing an inventory release to the market by temporarily lowering capital gains taxes for mom-and-pop investors to sell to first-time buyers,” Rouda Smith adds.

Regional breakdown: Existing-home sales in the Northeast climbed 1.5% in May to an annual rate of 680,000, falling 9.3% from May 2021. The median price in the Northeast was $409,700, a 6.7% rise from one year ago.

Existing-home sales in the Midwest dropped 5.3% from the previous month to an annual rate of 1,240,000 in May, slumping 7.5% from May 2021. The median price in the Midwest was $294,500, up 9.5% from one year before.

Existing-home sales in the South declined 2.8% in May to an annual rate of 2,410,000, down 8.4% from the previous year. The median price in the South was $375,000, a 20.6% jump from one year ago. For the ninth consecutive month, the South recorded the highest pace of price appreciation in comparison to the other three regions.

Existing-home sales in the West slid 5.3% compared to the month before to an annual rate of 1,080,000 in May, down 10.0% from this time last year. The median price in the West was $633,800, an increase of 13.3% from May 2021.

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