Sales of existing homes remained tepid in May, the latest sign that mortgage rates have sidelined both home buyers and sellers.
Previously owned homes were sold at a seasonally adjusted annual rate of 4.3 million in May, roughly 20% lower than last May’s rate and up 0.2% from April’s upwardly revised rate, the National Association of Realtors said Thursday.
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The average existing home sold for $369,100 in May.
David Paul Morris/Bloomberg
Sales of existing homes remained tepid in May, the latest sign that mortgage rates have sidelined both home buyers and sellers.
Previously owned homes were sold at a seasonally adjusted annual rate of 4.3 million in May, roughly 20% lower than last May’s rate and up 0.2% from April’s upwardly revised rate, the National Association of Realtors said Thursday.
The median existing home in May sold for $396,100, which is 3.1% lower than the same month last year. The drop, the greatest since late 2011, continues a year-over-year slump in prices that began in February.
May’s data sheds further light on below-average homebuying activity in the resale market. Excluding the low level of sales in May 2020 as the housing market froze in the early months of the Covid-19 pandemic, it was the slowest May sales pace since 2011.
Higher housing costs are likely behind some of the slowdown. The monthly mortgage payment on a new loan of average size has nearly doubled since the beginning of 2022, Apollo Global Management chief economist Torsten Slok wrote Thursday. “As households continue to run down their excess savings, these higher mortgage payments will eventually begin to have a negative impact on the housing market and the consumer,” he wrote.
Higher rates began to slow the previously hot housing market about a year ago, quelling competition and putting an end to double-digit year-over-year price increases.
The average mortgage rate as of Thursday was 6.67% on a 30-year fixed-rate home loan, according to Freddie Mac’s Primary Mortgage Market Survey. It has remained higher than 6% throughout 2023. “Mortgage rates heavily influence the direction of home sales,” Lawrence Yun, the Realtor association’s chief economist, said. “Relatively steady rates have led to several consecutive months of consistent home sales.”
Buyers likely aren’t the only ones pulling back. A recent Redfin analysis found that the majority of homeowners with mortgages have rates below 6%. Holding a mortgage with a lower rate could disincentivize would-be sellers from moving.
A relative dearth of homes for sale is another likely contributor to slower sales. There were 1.08 million homes for sale in May, the trade group said—an improvement compared with April, but the lowest May reading in the history of the association’s data dating back to 1999.
“Newly constructed homes are selling at a pace reminiscent of prepandemic times because of abundant inventory in that sector,” Yun said. “However, existing-home sales activity is down sizably due to the current supply being roughly half the level of 2019.”
Write to Shaina Mishkin at shaina.mishkin@dowjones.com