Sales of previously owned homes saw a modest increase of 0.8% in May compared to April, reaching a seasonally adjusted annualized rate of 4.03 million units, according to the National Association of Realtors (NAR). This small rise defied analyst expectations, which had predicted a 1% decline.
However, sales were still 0.7% lower than in May of the previous year, indicating a continued sluggishness in the market. The Northeast led the month’s regional gains with a 4.2% increase, while the West saw a 5.4% decline, reflecting its status as the country’s most expensive housing region.
Higher Mortgage Rates, Tight Supply, and Rising Prices Shape May’s Housing Market Trends
The slight rise in sales is attributed to contracts likely signed in March and April, a period when mortgage rates began to climb. The average rate on a 30-year fixed mortgage surpassed 7% in April, dampening buyer enthusiasm. Lawrence Yun, NAR’s chief economist, cited high mortgage rates as the primary factor holding back the market. He expressed optimism that if interest rates fall later in the year, supported by strong income growth, rising inventory, and robust job numbers, home sales will rebound.
U.S. Home Sales Inch Up in May as Rising Inventory Offsets Mortgage Rate PressureA key factor contributing to the sales increase was a notable rise in housing inventory. There were 1.54 million homes for sale at the end of May, a more than 20% increase from the previous year. Despite this growth, supply remains tight, with a 4.6-month supply at the current sales pace. This limited inventory continues to drive up prices. The median price for an existing home in May reached $422,800—a record high for the month and a 1.3% increase year over year.
Upper Market Slows as Buyers Face Affordability, Inventory, and Interest Rate Challenges
Sales patterns varied across price segments. Homes priced between $750,000 and $1 million were the only category to register a sales increase, albeit a modest 1%. Conversely, the $1 million-plus segment saw a decline compared to a year ago.
For the first time in 20 months, the upper end of the market is no longer outperforming others, potentially influenced by recent stock market volatility tied to new tariff announcements. Despite the stronger supply in higher price ranges, demand appears to be normalizing across segments.
Homes are staying on the market longer, with an average of 27 days to sell versus 24 days a year ago. First-time buyers made up just 30% of purchases, a slight drop from 31% last year and still below historical norms. Meanwhile, the share of all-cash transactions rose to 27%, up from the previous year.
Buyer demand remains relatively strong, with 28% of homes selling above list price, up significantly from the previous month’s 18%. These trends reflect a market still grappling with affordability constraints, limited affordable inventory, and high borrowing costs.
