US existing home sales edge up but prices drop by most since 2011

(Reuters) – U.S. existing home sales ticked higher in May to snap a two-month skid with condominium sales accounting for the modest gain, and selling prices nationally fell from a year earlier by the most in more than a decade, showing the uneven nature of the sector’s recovery from last year’s downdraft.

Existing home sales rose 0.2% to a seasonally adjusted annual rate of 4.3 million units last month, the National Association of Realtors said on Thursday. Sales rose in the South and West and fell in the Northeast and Midwest. Economists polled by Reuters had forecast home sales would fall to a rate of 4.25 million units.

Home resales, which account for the largest share of U.S. housing sales, tumbled 20.4% on a year-on-year basis in May.

Sales of single-family homes were little changed from April at a 3.85 million rate but were down 20% from a year earlier. Condo sales rose 4.7% to a 450,000-unit rate but fell by nearly 24% from last year.

The median sales price was $396,100, a 3.1% decline from a year earlier, the largest annual drop since 2011. Prices grew in the Northeast and Midwest but fell in the South and West.

The housing market has taken the biggest hit from the Federal Reserve’s fastest monetary policy tightening campaign since the 1980s. The average rate on the popular 30-year fixed mortgage has eased somewhat from a peak of 7.08% in November, which was the highest since 2002. The average contract rate was 6.73% last week, according to data from the Mortgage Bankers Association.

After tumbling in 2022, the housing market has shown signs of getting back on its feet in the first half of 2023 as borrowing costs have stabilized as the Fed nears the end of its rate-hiking cycle, but improvement has been uneven from one month to the next.

“Mortgage rates heavily influence the direction of home sales,” said NAR Chief Economist Lawrence Yun. “Relatively steady rates have led to several consecutive months of consistent home sales.”

Limited housing supply is also hindering rapid improvement.

There were 1.08 million previously owned homes on the market last month, up slightly from April but down 6.1% from a year ago.

At May’s sales pace, it would take 3.0 months to exhaust the current inventory of existing homes, up from 2.6 months a year ago. A four-to-seven-month supply is viewed as a healthy balance between supply and demand.

Properties typically remained on the market for 18 days in May, down from 22 days in April. Seventy-four percent of homes sold last month were on the market for less than a month. First-time buyers accounted for 28% of sales, up from 27% a year earlier.

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