February 21, 2024

A sign is posted in front of a home for sale on June 9, 2023 in San Francisco, California.

Justin Sullivan | Getty Images

Existing home sales were roughly flat in May compared with April, according to the National Association of Realtors.

Sales rose 0.2 percent to a seasonally adjusted annualized rate of 4.3 million vehicles. However, sales were down 20.4% compared to the same period last year.

The slow pace of spring sales is due to still-high prices, rising mortgage rates and a severe shortage of homes for sale.

As of the end of May, just 1.08 million homes were on the market. This is 6.1% less than the supply in May last year. At the current sales pace, that equates to a three-month supply. Six months is considered a balanced market. There were almost twice as many homes on the market before the coronavirus hit.

“The pace of new home sales is reminiscent of the pre-pandemic period as the sector has ample inventory,” said Chief Economist Lawrence Yun. National AR, said in a press release. “However, existing home sales activity has fallen sharply as supply is now about half of 2019 levels.”

Sales in May were based on turnover, or homes that likely came under contract in March and April. During this period, mortgage rates fluctuate widely. The average contract rate on the popular 30-year fixed mortgage started March above 7%, then fell sharply briefly to nearly 6%, before moving higher again, and was around 6.5% for most of April.

Strong demand is keeping home prices at the bottom, which typically fall even more due to the slow pace of sales. The median price of existing homes sold in May was $396,100, a 3.1% decrease from May 2022. Prices rose in the Northeast and Midwest, but fell in the South and West.

That’s the biggest price drop in more than a decade, but it’s a median measure that skews prices toward the types of homes that sell the most.

At present, the transactions of low-priced houses are the most active. While sales of homes in all price brackets are down from a year ago, sales of homes priced between $250,000 and $500,000 are down 12%. But sales of homes priced between $750,000 and $1 million fell 21%. Other price indices that measure repeat sales of similar homes showed prices rising again.

The pull between strong demand and tight supply keeps the market competitive. Nearly a third of properties sold for more than list price. Properties stayed on the market for 18 days in May, down from 22 days in April but up from 16 days in May 2022. Nearly three-quarters of the homes that sold in May stayed on the market for less than a month.

“With fewer homeowners ready to become sellers in 2023, buyers have a tough road ahead,” said Danielle Hale, chief economist at Realtor.com. “Our revised 2023 forecast The outlook anticipates some positives, namely a gradual decline in mortgage rates from mid-year onwards, and continued weakness in home prices, which will begin to stabilize high housing costs.”

The start of the summer housing season is much like spring, with sales slowing due to a lack of supply. A separate report from real estate brokerage Redfin showed pending home sales fell 16% in the four weeks ended June 18 from a year earlier. Pending home sales are based on signed contracts, not turnover.

Despite slowing sales, Redfin saw an 11% year-over-year increase in travel and other early buying service requests. There were significantly more buyers than homes for sale, with new listings down 24% from a year ago and total pending sales down 8%, the biggest drop in more than a year.