The National Association of Realtors reported that sales of previously owned homes remained essentially flat in May compared to April, rising only 0.2% to a seasonally adjusted, annualized pace of 4.30 million units. However, compared with the same period last year, sales dropped by 20.4%. The slow sales pace in spring 2022 is a result of a combination of still-high prices, elevated mortgage rates, and a critical shortage of homes for sale. At the end of May, there were only 1.08 million homes on the market, which is 6.1% lower than the supply in May of 2021. At the current sales pace, this represents a three-month supply, while a balanced market is considered to be six months. Prior to the Covid-19 pandemic, there were nearly twice as many homes on the market.
The median price of an existing home sold in May was $396,100, which is 3.1% lower than May 2022. This is the largest price drop in just over a decade, but it is a median measure that skews the price toward the type of home that is selling the most. Currently, lower-priced homes are seeing the most activity. While sales of homes in all price tiers are now lower compared with a year ago, sales of homes priced between $250,000 and $500,000 were down 12%, but sales of homes priced between $750,000 and $1 million were down 21%. Other price indexes that measure repeat sales of similar homes are showing prices rising again.
Strong demand has kept a floor under home prices, which would normally drop more given the slow sales pace. The pull between strong demand and tight supply is keeping the market competitive, with nearly a third of properties sold above list price. Properties remained on the market for 18 days in May, down from 22 days in April but up from 16 days in May 2021. Nearly three-quarters of the homes sold in May were on the market for less than a month. Despite slower sales, Redfin’s measure of requests for tours and other early stage buying services is up 11% year over year. There are simply more buyers than homes for sale, as new listings are down 24% from a year ago, and the total number of homes for sale is down 8%, the biggest drop in over a year.
Chief economist for the NAR, Lawrence Yun, said “newly constructed homes are selling at a pace reminiscent of pre-pandemic times because of abundant inventory in that sector, however, existing-home sales activity is down sizably due to the current supply being roughly half the level of 2019.” Danielle Hale, chief economist for Realtor.com, stated that “with fewer homeowners poised to become sellers in 2023, buyers have a tough road ahead. Our revised 2023 outlook expects that there will be some positives, namely, a gradual decline in mortgage rates beginning midyear and a continued softness in home prices that will start to stabilize high housing costs.”
Pending home sales fell 16% from a year earlier during the four weeks ended June 18, according to a separate report from Redfin. Pending sales are based on signed contracts, not closings. The start of the summer housing season is shaping up much like the spring, with slower sales due to lack of supply.