US Home Sales Show Unexpected Increase Amid High Mortgage Rates
In May, existing home sales in the United States rose unexpectedly, but the overall trend continues to be relatively weak, largely due to elevated mortgage rates.
The National Association of Realtors (NAR) reported on Monday that home sales climbed by 0.8% last month, reaching a seasonally adjusted annual rate of 403 million units. This, however, was at odds with economists’ forecasts by Reuters, which had anticipated a decline to about 3.95 million units.
Notably, the sales rate this May was the slowest observed since 2009.
In fact, this figure marked a 0.7% drop compared to the previous year in May.
Lawrence Yun, the NAR’s chief economist, commented on the numbers, suggesting that ongoing high mortgage rates are the primary factor behind the sluggish sales. He expressed hope that if rates decrease later this year, we might see an uptick in home sales across the country.
This year, the average rate for popular 30-year fixed-rate mortgages has lingered just below 7%. Amid all this, the uncertainty surrounding the economy, influenced in part by President Trump’s stringent tariffs on imports, led the Federal Reserve to halt its interest rate reduction cycle.
Last week, the central bank established an overnight interest rate range of 4.25% to 4.50%, marking the first adjustment since December. Jerome Powell, the Federal Reserve Chairman, indicated to reporters that they expect significant inflation rates attributed to these import duties.
A recent survey from the National Association of Home Builders revealed that builder sentiment has dropped to a two-and-a-half-year low in June. The NAHB reported an uptick in builders offering price reductions to attract buyers and projected a decline in new single-family home construction this year.
Meanwhile, housing investments, which include home construction and sales, saw a slight rebound in the first quarter after two years of significant downturns caused by soaring mortgage rates.
May also witnessed a 6.2% increase in the inventory of existing homes, totaling 1.54 million units, a notable 20.3% rise year-over-year.
In terms of pricing, median existing home prices went up by 1.3% compared to last year, reaching $422,800 in May—an all-time high for that month.
With the sales pace recorded in May, it is estimated that it would take about 4.6 months to deplete the current inventory of existing homes, up from 3.8 months prior.
This supply level indicates a healthy balance between supply and demand, which is typically viewed as being between four to seven months.
Last month, real estate properties remained on the market for an average of 27 days, a slight increase from 24 days in the previous year.
First-time buyers constituted 30% of sales, which is down from 31% the previous year. Real estate professionals suggest that a robust housing market really needs this number to be around 40% for stability.
Additionally, all-cash sales made up 27% of transactions, a slight dip from 28% a year ago, while distressed sales—such as foreclosures—comprise 3% of transactions, increasing from 2% the previous year.
