Skyrocketing home prices caused would-be buyers to retreat to the sidelines in May. The median price of an existing home, including single-family homes, townhomes, condominiums and co-ops, jumped 23.6 percent year-over-year to $350,300 — a record high, according to the National Association of Realtors.
Every region of the country recorded price increases in May, marking the 111th consecutive month of annual price gains since March 2012. Compared to the same period last year, the typical home price has shot up by $66,800. Surging prices can be attributed to the still-tight supply of homes on the market. While unsold inventory swelled 7 percent from April to May, reaching 1.23 million units, this total is down 20.6 percent from a year ago.
In May, there was a 2.5-month supply of unsold inventory at the current pace of sales, a slight boost from April’s 2.4-month supply. However, this figure is well below May 2020, when buyers benefitted from a 4.6-month supply.
For months, housing experts have predicted that a wave of new listings would hit the market once vaccination rates improved and states began reopening. Despite the return to ‘normal,’ there’s still no wave in sight, but NAR chief economist Lawrence Yun maintains that “the market’s outlook is encouraging.”
Existing home sales fell 0.9 percent from April to May to a seasonally adjusted annual rate of 5.8 million units. This marked the fourth month in a row of declining home sales on a monthly basis, but totals are still up 44.6 percent from one year ago when the pandemic wreaked havoc on housing market activity.
The only region of the country that logged a monthly increase in sales was the Midwest, where transactions rose by 1.6 percent. Existing home sales declined by 4.1 percent in the West, 1.4 percent in the Northeast and 0.4 percent in the South.
“Home sales fell moderately in May and are now approaching pre-pandemic activity,” said Yun. “Lack of inventory continues to be the overwhelming factor holding back home sales, but falling affordability is simply squeezing some first-time buyers out of the market.”
First-time buyers comprised 31 percent of home sales in May, compared to 34 percent last year. Investors or second-home buyers accounted for 17 percent of all purchases, unchanged from April, and up three points from May 2020. At 23 percent, there were slightly more all-cash buyers than the same time last year when 17 percent of all transactions were unfinanced.
The typical existing home spent 17 days on the market in May, consistent with April but down considerably from last year when it took 26 days for a property to go from ‘active’ to ‘pending.’ Further illustrating the breakneck pace of sales, 89 percent of homes sold in May were listed for less than a month.
Despite the less-than-rosy outlook painted in NAR’s May existing home sales report, Yun says that relief could soon be on the way for prospective buyers.
“Supply is expected to improve, which will give buyers more options and help tamp down record-high asking prices for existing homes,” he said.