Key facts
- Existing home sales rose 3.2% in May to 4.17 million units, exceeding forecasts.
- The median existing home price was $429,300, up 1.3% from a year ago.
- Home inventory increased 3.3% to 1.55 million units.
- It would take 4.5 months to sell current inventory at the May sales pace.
- First-time buyers represented 35% of sales, an increase from 30% a year prior.
Existing home sales in the U.S. rose more than anticipated in May, reaching a seasonally adjusted annual rate of 4.17 million units, according to the National Association of Realtors. This figure exceeded the 4.07 million unit rate forecast by Reuters-polled economists.
Sales saw increases in the Northeast, South, and Midwest regions, while remaining unchanged in the West. Year-over-year, resales also climbed by 3.2%. Lawrence Yun, NAR's chief economist, described the rise as positive news for the housing market, noting it was the highest level since December.
The May sales likely reflect contracts signed in March and April, a period when mortgage rates began to climb due to Middle East conflict-driven inflation and easing towards the end of April. The ongoing conflict has contributed to higher energy prices and U.S. Treasury yields, which influence mortgage rates. The average 30-year fixed-rate mortgage has risen approximately 50 basis points since late February.
With inflation showing signs of resurgence and a robust labor market, the Federal Reserve is expected to keep interest rates elevated, suggesting mortgage rates will likely remain high. Economists anticipate Wednesday's Consumer Price Index report will show a 4.2% year-over-year increase in May, up from 3.8% in April.
Despite the increase in sales, affordability remains a concern. The NAR's housing affordability index improved to 105.6 in May from 97.5 a year ago, but inflation is outpacing wage growth. The median existing home price rose 1.3% year-over-year to $429,300. Inventory increased by 3.3% to 1.55 million units, though it remains below pre-pandemic levels. At the current sales pace, it would take 4.5 months to sell all available homes, down slightly from 4.6 months a year ago. The median time properties spent on the market increased to 29 days from 27 days a year prior. First-time buyers constituted 35% of sales, up from 30% a year ago, though a 40% share is considered necessary for a healthy market.