Sales of previously-occupied homes fell for the fourth straight month in May as soaring prices and a limited number of available properties discouraged many would-be buyers.
Existing home sales dropped 0.9% last month from April to a seasonally-adjusted annual rate of 5.8 million units, the National Association of Realtors said Tuesday. The string of sales declines comes after sharp gains last fall and through the winter, as many Americans sought more living space during the pandemic. Sales are up nearly 45% from last May, when purchases fell to their lowest point of the COVID-19 outbreak.
The drop in sales suggests that the hot housing market is cooling a bit, even as hiring is steady and the economy is recovering rapidly from the pandemic recession. Home sales boomed last year as many Americans sought more living space during the pandemic. That lowered the number of homes available and caused prices to spike.
That increase has likely frustrated many would-be home buyers, particularly first-time buyers, and led them to postpone a home purchase. The median sales price topped $350,000 last month, the NAR said, a record high.
The number of homes for sale rose slightly in May, to 1.23 million, still very low by historical standards, and down nearly 21% from a year earlier. Perhaps revealing as well as any other statistic how skewed the housing market has become this year, there are now more realtors than there are homes for sale.
The housing market also increasingly reflects growing wealth and income disparities stemming from the pandemic, when most white-collar workers kept their jobs and many benefited from a rising stock market. Lawrence Yun, chief economist of the NAR, said that the rapid growth in the sales price of a typical home is largely driven by much stronger sales of more expensive properties. Sales of homes priced above $1 million have more than tripled in the past year, Yun said.
Another driver has been increased activity on Wall Street in the acquisition of single-family homes. Big institutional investors have begun to buy property and rent them out. All-cash transactions, which includes investors and wealthy buyers, made up 23% of sales in May, up from 17% a year ago.
“Many first-time buyers are being squeezed by a one-two combo of declining affordability and real estate investors moving into the same price segment,” said George Ratiu, senior economist at Realtor.com.
Prices rose so quickly that by May, roughly half of all homes sold were purchased for more than their asking price, according to real estate brokerage Redfin. Two years earlier, before the pandemic, just one-quarter of sales were above the asking price.
Historically low mortgage rates have helped fuel sales by making monthly payments more affordable. The average interest rate on a 30-year mortgage fell to 2.93% last week, according to mortgage buyer Freddie Mac.