Existing home prices hit a record $402,000 – but sales are falling as housing market adjusts ‘painfully’ to higher prices

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Existing home sales fell for a fourth straight month in May in the latest sign that rising rates have hampered sales in the housing market – but prices still hit a record high above $400,000 in May as housing inventory levels plummet and supply chain constraints. To the affordability challenges of potential home buyers.

key facts

Existing home sales fell 3.4% from April to a seasonally adjusted annual rate of 5.4 million in May, compared to 5.9 million one year ago, according to data released Tuesday by the National Association of Realtors.

Meanwhile, the median existing home price was a record $407,600, up nearly 15% from a year ago with prices rising in all regions nationwide — representing 123 consecutive months of year-over-year price gains for the longest streak of increases. registered, NAR said.

NAR Chief Economist Lawrence Yoon said in a statement Tuesday that the number of homes sold is “essentially back” to pre-pandemic levels seen in 2019, “after two years of gang performance,” noting that further sales declines are expected. in the coming months. As rising mortgage rates increase affordability challenges in the housing market.

With the Federal Reserve raising interest rates three times this year, mortgage rates have nearly doubled to 6% from a record low of 3% at the end of last year — reducing home buying demand and raising the cost of home buying.

According to a report Tuesday from real estate brokerage Redfin, a $2,500 home buyer has lost nearly $120,000 in purchasing power since the end of last year due to price hikes, with the average monthly mortgage payment rising more than $500. same period.

“The housing market is adjusting quickly and painfully to the rise in mortgage rates,” said Pantheon Macro Chief Economist Ian Shepherdson, in comments emailed after the report, noting that housing stock — still at historically low levels — continues to drive prices. up despite the drop in sales.

Amazing fact

Less than 46% of homes for sale across the country are affordable on a monthly budget of $2,500 with an interest rate of 6%, down from about 62% that would have been affordable if prices were still at 3%, Redvin notes.

critical quote

“Higher mortgage rates are necessary to calm a volatile housing market, but they also put buyers in a difficult position,” Redfin Chief Economist Daryl Fairweather said in a statement. “The increase in monthly payments means that many home seekers now need to consider smaller homes – perhaps further away from their ideal neighborhood – or stick to renting them out if their price is completely off-market.”

main background

Historically high savings rates and government stimulus have helped spark a home-buying frenzy during the pandemic – but signs of slowing quickly emerged as the Federal Reserve embarks on its most aggressive rate-raising cycle in two decades. The number of homes started, or new homes where construction has begun, fell 14.4% to about 1.5 million last month from 1.8 million in April — far below economic expectations that would require nearly 1.7 million starts, and new home sales collapsed. in April. Roughly 17% from March.

What to watch

New home sales data for May is due on Friday. Economists expect about 600,000 new homes were sold last month, up after a sharp drop to 591,000 in April.

in-depth reading

The housing market is ‘in free fall’ as new construction prices fall – here’s when ‘reset’ can drive prices down (Forbes)

Mortgage loans exceed 6% and reach their highest level since 2008: the housing market could ‘torpedo’ the US economy, experts warn (Forbes)

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