US home buyers are taking a breather, as prices reach dizzying heights. Dizzying for the US, that is. National Association of Realtors (NAR) data shows existing-home sales fell in May. Higher prices have trimmed demand for several months now. The market is now beginning to head towards its pre-pandemic levels of activity.
US Home Sales Fall For A Fourth Month
US existing-home sales took another dive, pushing the volume to the lowest level in months. The seasonally adjusted annual rate (SAAR) of sales reached 5.8 million in May, down 0.9% from the month before. Volumes are still elevated, with annual growth 44.6% higher than last year. Though that number is impacted by the early pandemic base effect.
Still, it was the fourth month to see a decline. It was also the fewest sales since June 2020. Not quite at pre-pandemic levels, but they’re getting there fast.
US Existing-Home Sales
The seasonally adjusted annual rate (SAAR) of existing-home sales in the US.
Source: NAR; Better Dwelling.
Months of Inventory Rise To A 7-Month High
Initial thoughts are, this has to be a lack of inventory, right? Well, inventory is actually rising relative to sales these days. There were 2.5 months of inventory in May, up from 2.4 in April. It was the fourth consecutive month to see this number climb, and it’s at a 7-month high. The market is relaxing.
A relaxing market isn’t quite the same as a relaxed market though. There were 3.1 months of inventory on average in 2019. During the pandemic, it fell to a recent low of 1.9 months. The market is about half way to retracing pre-pandemic levels from lows. With prices and mortgage rates still climbing, the odds are towards less demand.
Western States Saw The Biggest Drop In Home Sales
NAR data shows it was Western states seeing the sharpest decline in home sales. The regional breakdown shows SAAR sales fell to 1,180,000 in May, down 4.1% from a month before. The annual increase is 61.6% higher, but is skewed due to the pandemic’s base effect. In a more stable comparison, SAAR sales are up just 2.60% from the 2019 average. Western US real estate markets saw a boom, but it wasn’t as big as other regions.
US Existing-Home Sales By Region
The monthly percent change in the seasonally adjusted annual rate (SAAR) of existing-home sales for May, broken down by region.
Source: NAR; Better Dwelling.
Existing-home sales continue to fall across the United States, along with new homes. Despite inventory levels moving towards healthier levels, prices are still climbing very fast. To put it bluntly, home sales aren’t falling because people can’t find homes. They’re falling because they can’t afford them. As prices climb, fewer people are able to buy, or want to. If the trend of higher prices continues without fewer sellers, the market will favor buyers. Prices tend to fall when that happens.
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