Sales of existing homes continue to slow—back to 2019 levels—in May as selling prices continued to climb, according to the National Association of Realtors.
NAR also reported that the median selling price topped $400,000 for the first time. At $407,600, that represents a 14.8% increase from a year ago and makes it a continuing record of 123 consecutive months of year-over-year increases.
NAR Chief Economist Lawrence Yun commented on recurring trends, including four consecutive months of declining sales.
It comes after “two years of gangbuster performance,” he said in prepared remarks, adding that “single-family home and condominium sales market movements are nearly equal, perhaps implying that the preference for suburban life over city life that had been present over the past two years is fading with a return to pre-pandemic conditions.
Further declines in sales should be expected in the coming months, given housing affordability issues related to the sharp rise in mortgage rates this year, Yun added.
“Nevertheless, appropriately priced homes are selling quickly and inventory levels have yet to rise significantly.—almost doubled—to cool home price appreciation and provide more options for homebuyers.
Nothing mysterious here
“In terms of declining home sales and rising median home prices, there’s nothing mysterious here,” Jeff Benach, director of Lexington Homes, told GlobeSt.com. “While rates have skyrocketed, traffic has slowed and buyers have pulled back. Price has increased with new construction for two reasons: demand/availability and construction costs. As both are now falling, look to prices stop rising.
Greg Phillips, chief technology officer at Houwzer, tells GlobeSt.com that home sales are down because of the affordability factor, especially with rising mortgage rates.
“We went from a typical 30-year fixed mortgage from just under 3% to around 6% in less than a year,” Phillips said. “Median home prices for all home types are at an all-time high in most markets. Given how few homes are available relative to the number of buyers still looking for a place to buy, neither Neither market equilibrium nor price cuts are guaranteed, nor even necessarily probable, despite consumer perception.
Date the rate, marry the house
Still, some observers see the glimmers of an affordable housing market beginning to emerge. “Maybe we’ve hit the affordability tipping point,” Seth Bellas, director of Churchill Mortgage, told GlobeSt.com. “Appreciation will slow significantly as the market softens and the average seller will not be able to sell between $25,000 and $100,000 above their asking price like they have for the past two years.
“I keep telling buyers that higher rates also mean fewer buyers and you date the rate but marry the house. Emphasis should be placed on the fact that over a period of 60 years, home ownership has proven to be an important tool for creating wealth and, with rents also skyrocketing, owning a home remains the best option for many.
Meanwhile, signs of slowing sales aren’t so apparent in many markets, like Chicago. John Matthews, senior vice president of residential sales at Baird & Warner, a Chicago-based brokerage firm, told GlobeSt.com that homes in the area are still moving fast despite high prices and rates.
“Although down from all-time highs of last year, homes are still selling at an incredible pace, buyer demand remains high despite rising interest rates, and we are seeing homes priced correct always get multiple offers,” Matthews said.
Year-to-date through May, 46,000 homes have sold in the Chicago area, which is historically the second-highest number behind only 2021, when around 51,000 homes sold during that period.