The numbers: U.S. existing-home sales fell 3.4% to a seasonally adjusted annual rate of 5.41 million in May, the National Association of Realtors said Tuesday. Compared with May 2021, home sales were down 8.6%.
The decline was in line with the forecast of economists polled by the Wall Street Journal.
This is the fourth straight monthly decline and comes as mortgage rates have spiked and prices have risen.
Key details: The median price for an existing home rose to a record $407,600, up 14.8% from May 2021. It is the first time the median existing-home sales price gas been above the $400,000 level.
The number of homes on the market rose 12.6% to 1.16 million units in May. This is still down 4.1% from a year ago.
Expressed in terms of the months-supply metric, there was a 2.6-month supply of homes for sale in May, up from 2.2 months in April. Before the pandemic, a four-month supply was more the norm.
Homes remained on the market only for 16 days on average, the lowest market-time figure on record.
Regionally, sales fell in all regions of the country except the Northeast.
All-cash transactions made up 25% of all transactions, down from 26% in April. About 27% of homes were sold to first-time home buyers.
Big picture: The housing sector is starting to soften, after running red hot during the coronavirus pandemic.
Borrowing costs are surging, making home ownership more expensive for would-be buyers. Not only did the Federal Reserve tighten monetary policy, mortgage rates are also surging. As of Thursday, the average rate for a 30-year fixed-rate mortgage was 5.78%, according to Freddie Mac.
Meanwhile, construction on new homes plunged to a two-year low in the month of May, reflecting increasing wariness among homebuilders, economists said.
The next few months of data will reflect the impact of higher mortgage rates, Richard Moody, chief economist at Regions Financial Corporation, said in a preview note. He added that he expects to see “erosion in sales, and price pressures … [to] ease as listings sit on the market for longer periods of time.”
What the realtors said: “Home sales right now, after two years of gangbuster activity, is trending back down to pre-pandemic levels,” said Lawrence Yun, chief economist at the NAR. “I do anticipate further declines in home sales,” he added, as “the impact of higher mortgage rates has not been fully reflected in the data.”
Prices were still high, and homes were still selling very fast, Yun noted, despite mortgage rates rising and the overall existing-home sales number sinking. These are very “unusual” market conditions, he stressed, primarily driven by insufficient inventory.
What are they saying? “In short, while the housing market is cooling, it remains robust, at least for now,” Stephen Stanley, chief economist at Amherst Pierpont, said in a note.
Market reaction: The Dow Jones Industrial Average
DJIA,
and the S&P 500
SPX,
were both sharply higher in early trading on Tuesday. The yield on the 10-year Treasury note
TMUBMUSD10Y,
rose to 3.27%.