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Sales of previously owned homes inched higher in May, although not enough to rescue a weak spring housing market that suffered under elevated mortgage rates and economic uncertainty.
Existing-home sales rose 0.8% last month from April, to a seasonally adjusted annual rate of 4.03 million, the National Association of Realtors reported Monday. The May figure was down 0.7% from a year earlier.
Home prices continued to rise, with the median sales price of $422,800 up 1.3% from a year earlier and setting a new record high for the month of May.
On a regional basis, existing-home sales increased month over month in the Northeast, Midwest, and South, but declined in the West.
“The relatively subdued sales are largely due to persistently high mortgage rates,” says NAR Chief Economist Lawrence Yun. “Lower interest rates will attract more buyers and sellers to the housing market. Increasing participation in the housing market will increase the mobility of the workforce and drive economic growth.”
Mortgage rates for 30-year fixed home loans averaged 6.82% for the month of May, according to Freddie Mac.
Meanwhile, the supply of existing homes for sale continued to expand, offering home shoppers who can afford to purchase a home at current rates a wider selection of options.
By the end of May, there were 1.54 million unsold homes on the market, up 6.2% from April and a 20.3% increase from a year earlier. Still, total inventory remains lower than prior to the pandemic, when around 2 million homes for sale was typical.
At the current sales pace, May existing-home inventory represented a supply of 4.6 months, up from a 4.4-month supply at the end of April and 3.8 months a year ago. On a months-supply basis, for-sale inventory is now at its highest level since 2016.
Typically, a supply of between 4 and 6 months is considered a balanced market between buyers and sellers, while 6 months or more represents a buyer’s market.
“While some are calling this housing market a buyer’s market, I would say the market is shifting in a buyer-friendly direction. We’re moving from a pretty seller-friendly housing market to one with more balance,” says Realtor.com® Chief Economist Danielle Hale.
Hale says that buyers can expect that they will not only have more options to choose from, but they will also have more time to consider their choices in a market with less competition from other shoppers.
May report closes out disappointing spring housing season
Earlier in the year, hopes had run high that rising inventory would finally lure reluctant buyers from the sidelines for the spring housing season and deliver a rebound in sales after two years of historically weak activity.
However, existing home sales remained extremely weak in March, April and May, underperforming last year’s market, which ended up being the weakest year for sales of previously owned homes in nearly 30 years.
Affordability remains a key challenge, with record-high home prices and elevated mortgage rates combining to create the toughest affordability picture for buyers in at least four decades.
Uncertainty has also weighed on buyers, after President Donald Trump‘s Liberation Day tariff announcements, and subsequent whirlwind pauses and reversals, raised questions about economic stability and the possibility of a recession.
The Consumer Confidence Index, a measure of everyday Americans’ sentiments about the economy, plunged in April to its lowest reading since May 2020, in the early days of COVID-19 pandemic.
Although the survey showed a rebound in May, after Trump moderated many of his tariff moves, the mid-spring hit to sentiment may have derailed homebuying plans for some Americans in the heart of the spring season that is the most popular time to buy and sell homes.
Trump for his part has pointed the finger at Federal Reserve Chair Jerome Powell, calling the central banker a “stupid person” for leaving the Fed’s benchmark rate unchanged since December.
Trump and others in his administration have called for a dramatically lower Fed rate, saying that it would deliver lower mortgage rates and ease affordability pressure on consumers.
In the meantime, most experts predict little movement on mortgage rates in the near future, with Fed policymakers now forecasting just a single quarter-point rate cut by the end of the year.