US home prices top $400k for first time, hurting sales in May – AFR

The average US home price broke through $400,000 for the first time, causing existing home sales to fall for a fourth straight month in May, according to industry data released on Tuesday.

Sales fell 3.4 percent from April when the median selling price hit $407,600, up 14.8 percent from a year earlier, the National Association of Realtors (NAR) reported.

The pace of sales slowed last month to a seasonally adjusted annual rate of 5.41 million, which was 8.6 percent lower than in May 2021, the report said.

“Home sales have essentially returned to 2019 levels — before the pandemic — after two years of gangbuster performance,” said NAR chief economist Lawrence Yun.

“Further sales declines should be expected in the coming months as housing affordability is challenged by the sharp rise in mortgage rates this year,” he said.

According to Freddie Mac, home loan rates for a 30-year fixed-rate mortgage rose to 5.23 percent in May from 4.98 percent in April as the Federal Reserve raises the reference rate to curb rising inflation.

The slowdown in sales caused the inventory of homes on the market to rise 12.6 percent to 2.6 months of inventory — just above where it was in May 2021, the report said.

Cheap lending rates had helped fuel strong demand for homebuyers during the pandemic, driving prices ever higher as builders struggled to keep up due to backlogs of lumber and other materials and a shortage of workers.

Now, “the market is adjusting quickly and painfully to the rise in mortgage rates, which has pushed monthly payments on the average home by more than 50 percent since last August,” said Ian Shepherdson of Pantheon Macroeconomics.

He said prices wouldn’t normally start falling until stocks have built up to seven-month supply, but “the speed of market dislocation in recent months thanks to the sudden rise in interest rates means there is a period of falling prices.” a good bet.”

Sales fell in the United States except for the Northeast, while prices rose nationwide.

All-cash buyers accounted for a quarter of sales in May, NAR said.

Yun noted that trends in condominium sales may indicate that “the preference for suburban life over city life that has been present for the past two years is waning as conditions return to pre-pandemic conditions.”