U.S. home sales in May fell to some of the lowest levels seen in the past decade, according to a report by real estate brokerage Redfin. Both demand and supply remained sluggish due to high mortgage rates. Housing affordability in the U.S. is at an all-time low, with median home prices reaching record highs and the 30-year fixed mortgage rate hovering around 7%. This has suppressed both demand and supply, with the number of homes for sale approximately 25% below pre-pandemic levels. In May, 407,959 homes were sold, marking one of the lowest monthly sales figures in the last ten years.
Home sales dropped 1.7% month-over-month in May on a seasonally adjusted basis and fell 2.9% from a year earlier. The median home sale price increased to a record high of $439,716, up 1.6% month-over-month and 5.1% year-over-year. Seasonally adjusted new listings rose 0.3% month-over-month in May and 8.8% from a year earlier, yet they remained about 20% below pre-pandemic levels. According to Redfin (RDFN) Senior Economist Elijah de la Campa, "Sales are sluggish because high homebuying costs are making both house hunters and prospective sellers skittish. And with so few homes for sale, buyers in some markets are getting into bidding wars, which is helping push home prices to record highs."
Market Overview:- U.S. home sales in May reached some of the lowest levels in the past decade.
- High mortgage rates and record home prices have depressed both demand and supply.
- The number of homes for sale is roughly 25% below pre-pandemic levels.
- Home sales fell 1.7% month-over-month in May and 2.9% from a year earlier.
- Median home sale price reached a record high of $439,716, up 1.6% month-over-month and 5.1% year-over-year.
- Seasonally adjusted new listings rose 0.3% month-over-month in May and 8.8% from a year earlier but are still below pre-pandemic levels.
- High homebuying costs are expected to continue affecting both house hunters and prospective sellers.
- Bidding wars in some markets are pushing home prices to record highs.
- The performance of homebuilder stocks may continue to be influenced by supply constraints and high prices.
Despite the sluggish market conditions, homebuilder stocks surged in 2023 as tighter supply led to higher sales. However, the rally has since lost momentum. Pultegroup (PHM) is up 11.8% year-to-date, D.R. Horton (DHI) is down 5.61%, and Lennar (LEN) is up 4.03%. The housing market's challenges reflect broader economic issues, with affordability remaining a critical concern for many potential buyers. The market's future will depend on how these dynamics evolve in the coming months.
The housing market's difficulties mirror wider economic concerns, emphasizing the critical issue of affordability for many buyers. The path forward will depend significantly on how market dynamics shift in the upcoming months, as both demand and supply pressures continue to shape the landscape.
