Sales of previously occupied US homes slowed for the fourth straight month as mortgage rates rose and record highs discouraged house hunters.
Existing home sales fell 3.4% from April last month to a seasonally adjusted annual rate of 5.41 million, according to the National Association of Real Estate Agents.
According to FactSet, the annual sales pace was faster than economists expected. Sales were down 8.6% from May last year.
After rising to 6.49 million units a year in January, sales have fallen at the slowest pace since the pandemic began selling at 4.77 million units a year in June 2020.
Despite slowing home sales, home prices continued to rise in May. Median home prices across the country rose 14.8% year-on-year to $ 407,600 in May. According to NAR, this is a record high, according to data dating back to 1999.
The housing market, a key part of the economy, is slowing as homebuyers face significantly higher mortgage costs than they did a year ago after mortgage rates soared.
Average long-term mortgage rates in the United States showed the largest week-long rise in 35 years, and last week the Federal Reserve raised key rates by three-quarters to combat the worst inflation in 40 years.
According to mortgage buyer Freddie Mac, the average 30-year mortgage rate rose to 5.78% last week, the highest since November 2008 during the housing crisis.
The rise in mortgage rates follows a sharp rise in 10-year Treasury yields, reflecting expectations for an overall rise in interest rates. Fed Showed that intention Keep raising short-term interest rates as we are trying to cool the US economy without causing a recession.
The recent rise in interest rates has not yet been reflected in home sales data, as the weekly average of 30-year interest rates was slightly above 5% for most of May.
Lawrence Yun, Chief Economist at NAR, said: “Given this situation, we expect home sales to decline further.”
Some real estate trends favored buyers last month. As is often the case at this time of the year, the number of homes in the market in May increased from the previous month. By the end of May, about 1.16 million properties had been put up for sale, up 12.6% from April, but down 4.1% from April last year.
Still, at the current sales pace, the level of properties for sale is equivalent to 2.6 months of supply, NAR said. This is an increase from 2.2 months in April and 2.5 months a year ago. It’s still not enough for a four-month supply that reflects a more balanced market between buyers and sellers.
Yun expects home inventories to be above year-on-year levels by the fall.
This year’s recession in home sales has forced some economists to adjust their outlook for the 2022 housing market. Realtor.com currently expects US home sales to decline 6.7% from last year. According to Danielle Hale, Chief Economist at Realtor.com, 2022 will still be the second best year for home sales after 2021 since 2007.
Still, the homes sold didn’t stay in the market for long, despite the high interest rates on mortgages and the burden of affordability. On average, homes are sold just 16 days after they hit the market last month, the fastest selling pace NAR has tracked. April was the 17th.
Inflation is as high as 40 years, mortgage rates are rising, home prices are rising, and the supply of homes for sale is tight, making home ownership unattainable, especially for first-time buyers. ..
First-time buyers accounted for 27% of transactions, down from 28% last month and 31% last May, according to the NAR.
According to NAR, real estate investors and other buyers can buy homes with cash alone, avoiding the need for financing, accounting for 25% of total sales last month, down from 26% in April.