Rising interest rates are cooling the US real estate market. National Association of Realtors (NAR) data shows existing-home sales fell in May. They didn’t just fall, though. Home sales fell significantly faster than homes listed for sale, helping to push the months of inventory towards more historic levels.
US Home Prices Are Still Rising, But At A Slower Pace
US existing home prices are still climbing but the rate of growth continues to decelerate from historic levels. The median sale price came in at $407,600 in May, up 14.8% from last year. It’s a very high rate of growth, but it’s also much lower than the annual growth of 25.2% reported this time last year.
US Existing-Home Sales Fell 8.6% In May
Part of the normalization of existing home price growth is due to normalizing sales. The seasonally adjusted annual rate (SAAR) of sales reached 5.4 million homes in May. This is down 3.4% from a month before and 8.6% lower than last year.
The number of existing-home sales was the lowest since May 2020. That was during that brief cratering during the initial public health measures. While sales are lower, this level is more in line with historic trends, just a little higher than the average for 2019.
US Existing-Home Inventory Improved, Falling Slower Than Sales
Falling sales helped ease pressure on inventory, which fell at a slower rate. The unadjusted level of listings fell to 1.16 million homes for sale in May, down 4.1% lower than last year. At the current rate, there’s 2.6 months of inventory (MOI), tied at the highest level since August 2021. Finding a higher level requires going back before 2020, so there’s significantly more inventory than the market has become accustomed to.
US existing-home sales and inventory are finally on the path of normalization. While inventory is falling, demand for that inventory at these prices has dropped even faster. If this keeps up, we might even see normal price growth.