For the fourth consecutive month, existing home sales (real estate contracts signed) fell 3.4% in May from April, and slumped 8.6% from a year ago, according to the National Association of Realtors (NAR). The average days on market fell from 17 days in April (and May 2021) to 16 days in May, and 81% of all homes listed sold in under a month.
The median home price rose 14.8% over the last year to $407,6000, the first time it has ever exceeded $400K. May marks the 123rd consecutive month of annual increases, the longest-running streak in history.
Inventory remains tight, but did rise 12.6% from April to 1.16 million by the end of May, marking a 2.6 month sales pace. Inventory is down 4.1% from May of 2021.
“Home sales have essentially returned to the levels seen in 2019 – prior to the pandemic – after two years of gangbuster performance,” said NAR Chief Economist, Dr. 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 that had been present over the past two years is fading with a return to pre-pandemic conditions,” Dr. Yun added.
He notes that it is expected that home sales in coming months will continue to decline in light of rising mortgage rates, yet appropriately priced homes will continue to sell quickly.
First time buyers made up 27% of sales in May, down from 28% in April. This diminishing number remains troubling, as the average hovered around 33% for years, and was at 31% in May 2021.
All-cash sales rising to 25% (up from 23% in May 2021), and individual investors or second-home buyers accounted for 16% of sales in May.
“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,” said NAR President Leslie Rouda Smith.
“To counter this trend,” Rouda notes, “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.”
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