In May, existing home sales in the United States experienced a decline for the third consecutive month, as home prices soared to unprecedented levels. The median home price reached an all-time high of $419,300, shedding light on the slowdown in sales amidst elevated interest rates. Year-over-year sales were down by 2.8%, according to the National Association of Realtors (NAR).

On a seasonally adjusted annual basis, existing home sales dropped by 0.7% in May compared to April, totaling 4.11 million units. Affordability challenges persist in the market due to the combination of skyrocketing prices and interest rates that have remained around 7%.

Chief economist at the NAR, Lawrence Yun, expressed surprise at the lack of a predicted spring recovery in the housing market. Only the Midwest region, rated as the most affordable in the country, witnessed an increase in home sales. Sales remained flat in three out of four regions, with the South being the only one experiencing a monthly decline.

In May, the inventory of homes for sale saw a nearly 7% increase to reach 1.28 million units, the largest supply in over four years. The inventory is currently considered a 3.7-month supply, almost 19% higher than the previous year. Yun attributes the rise in inventory to changing circumstances of homeowners, including retirement, growing families, and job relocations.

Despite the increase, the current inventory levels remain significantly lower than those seen in the pre-pandemic era, when available units ranged from 1.8 million to 2.3 million prior to 2019.

The median home price experienced a substantial annual increase of almost 6% in May, reaching a record high of $419,300. This marks the 11th consecutive month of year-over-year gains and the strongest price appreciation since October 2022. Properties also spent an average of 24 days on the market in May, two days fewer than in April but higher than the 18 days observed in May of the previous year.

Surprisingly, despite the low sales activity, nearly one in three homes sold above the listing price and received between two and three offers. First-time homebuyers continued to show resilience, with their share of purchases surpassing 30% for the second consecutive month.

However, the lack of affordable housing remains a concern. Sales for homes priced over $1 million experienced a significant increase of 23%, while sales for homes priced under $100,000 and $250,000 declined by 16% and 6%, respectively. Yun emphasized that it is not a lack of interest but rather a scarcity of inventory that is hindering buyers from acquiring more affordable homes.

The current monthly payment required to purchase a median-priced home stands at around $2,200, more than double the pre-pandemic average of $1,000. The impact of these rising prices and limited inventory is being felt by the American public, according to Yun.

As the housing market faces these challenges, industry experts and potential buyers will closely monitor the developments and trends in an effort to navigate the changing landscape.