Sales of previously occupied U.S. homes edged higher in May, but the national median sale price posted its biggest annual drop in more than a decade, as a near all-time low supply of available properties constrained the housing market.
Existing home sales rose 0.2% in May from April to a seasonally adjusted annual rate of 4.3 million, the National Association of Realtors said Thursday. That’s slightly above what economists were expecting, according to FactSet.
Sales sank 20.4% compared with May 2022. That marks 10 consecutive months of annual sales declines of 20% or more. The annual drop was steepest in markets across the West and Northeast, where sales slumped more than 25%.
In Chattanooga, home sales in May were down nearly 17% from a year ago, but the median price of homes sold remains strong at $323,028, up 0.4% from a year ago.
The national median home price fell 3.1% from May 2022 to $396,100, the National Association of Realtors said. The year-over-year decline is the biggest since December 2011, when the housing market was still on the mend following the mid-2000s housing bust.
The latest housing market figures are more evidence that even with prices declining after heading higher for more than a decade, many house hunters are being held back by a persistently low inventory of homes for sale.
“There’s simply not enough inventory,” said Lawrence Yun, chief economist for the National Association of Realtors.
All told, there were 1.08 million homes on the market by the end of May, an increase of 3.8% from April, but down 6.1% from a year earlier, the association said.
The number of homes on the market at the end of May amounts to a three-month supply at the current sales pace, an improvement over the 2.9-months in April and 2.6 months in May 2022. Still, in a more balanced market between buyers and sellers, there is a five- to six-month supply.
“While fluctuating interest rates have pushed some buyers to the sidelines, a shortage of inventory is also to blame for lower-than-average home sales this time of year, as current homeowners, many of whom locked in mortgage rates several percentage points below today’s current rates, are delaying the decision to sell until market conditions improve,” said Steven Sharpe, president of the Greater Chattanooga Association of Realtors.
The shortage of homes for sale has kept the market competitive, driving bidding wars in many places, especially for the most affordable homes. One-third of the homes that were purchased in May sold for more than their list price, Yun said.
Homes listed for sale in May typically sold within just 18 days, while 74% were on the market for less than a month, the National Association of Realtors said.
The combination of high borrowing costs and intense competition for the most affordable homes on the market is keeping many first-time buyers on the sidelines. They accounted for 28% of home sales last month, down from 29% in April.
“First-time buyers (are) still struggling to get into the market,” Yun said.