The real estate market is facing some significant challenges, with sales of previously owned homes at a 30-year low. In May, existing home sales barely moved, dropping by 0.7% from April. This comes at a time when prices are reaching new record highs and mortgage rates remain high. According to the National Association of Realtors (NAR), sales fell by 2.8% compared to May of the previous year, reflecting a worrying trend in the housing market.
Challenges in Regions across the Board
The sluggish sales pace is evident in all regions, with sales remaining mostly unchanged month to month except in the South, where they fell by 1.6%. One of the most significant changes in the market is the increase in the inventory of homes for sale, which jumped by 6.7% from the previous month and 18.5% from the previous year. Despite this increase, the supply of homes is still relatively low compared to the current level of demand, with a 3.7-month supply at the current sales pace.
Impact of Rising Prices
The relentless demand for housing continues to drive prices higher, with the median price of an existing home reaching a record-high of $419,300 in May, reflecting a 5.8% increase from the previous year. This surge in prices is the most substantial since October 2022, affecting all regions of the country. The combination of high mortgage rates and soaring home prices has made homeownership increasingly challenging for many Americans, with the median price skewing towards the higher end of the market.
Sales of homes priced below $250,000 have declined compared to the previous year, while sales in higher price brackets have seen increases. Homes priced between $750,000 and $1 million have experienced a 13% boost in sales, and homes priced over $1 million have seen a staggering 23% increase. Cash sales continue to dominate the market, accounting for 28% of all transactions, while first-time buyers make up 31% of sales, up from 28% the previous year.
Despite the challenges posed by high prices and low inventory, the real estate market remains competitive, with two-thirds of homes going under contract in less than a month. Consumers are increasingly looking for well-priced properties that require minimal work, resulting in a faster turnaround for such listings. However, some properties are languishing on the market, indicating a growing disparity between properties that are in high demand and those that are struggling to attract buyers.
The real estate market is in a state of flux, with stagnant sales, rising prices, and shifting consumer preferences shaping the current landscape. While inventory levels are gradually increasing, they remain insufficient to meet the growing demand for housing. As the market continues to evolve, it is essential for buyers, sellers, and industry professionals to adapt to these changing dynamics to navigate the complexities of the real estate market successfully.