Existing-home sales climbed to their highest level since October 2022 in May, fueled by a temporary drop in mortgage rates earlier this spring and an improving supply of homes for sale.
According to a new report from Redfin, seasonally adjusted existing-home sales rose 2.8% month over month in May to an annualized rate of 4.53 million units. Overall home sales, including both existing and newly built homes, increased 3.8% from April to 308,446 transactions, also reaching their highest level since October 2022.
The gains came as mortgage rates spent much of April in the low-6% range, allowing buyers to lock in financing before rates moved higher again. The average 30-year fixed mortgage rate was 6.44% in May.
For mortgage professionals, the more important figure may be what happened next.
While closed sales surged, pending home sales — a more current indicator of buyer demand — were essentially unchanged from April, rising just 0.1% month over month. Because pending sales reflect contracts being signed in real time, they provide an early look at how buyers are responding to current market conditions.
"The market is very sensitive to mortgage rates," Redfin economists noted, pointing to the divergence between closed and pending sales. The May increase in closed transactions largely reflects contracts signed in April when rates temporarily eased, while flat pending sales suggest higher borrowing costs are already weighing on demand.
Inventory Gains Continue
The report also points to improving market conditions for buyers. New listings rose 1.4% month over month in May to 396,181 properties, the highest level since 2022. Active inventory increased to nearly 1.48 million homes, the highest level since 2020.
Redfin said many homeowners listed properties in response to stronger buyer activity during April, hoping to capitalize on increased demand. The growing supply also helped drive May's sales gains by giving buyers more options and negotiating leverage.
Despite the inventory increase, signs suggest the market may be becoming slightly more competitive.
Just under 60% of homes sold below their original list price in May, down for the sixth consecutive month. Sellers also appear to be pricing homes more realistically from the outset, with the median price of newly listed homes essentially unchanged from April.
Meanwhile, the median U.S. home sale price rose 2% year over year to $398,771.
What It Means
The May report paints a mixed picture for the housing market heading into the second half of 2026.
On one hand, lower rates earlier this spring unlocked demand that had been sidelined by affordability pressures, producing the strongest sales pace in nearly four years. Inventory continues to improve, creating more opportunities for transactions and giving buyers greater choice.
On the other hand, flat pending sales indicate that demand remains highly rate-sensitive. With mortgage rates moving higher again in May, the boost from April's rate decline may prove temporary.
For LOs, the takeaway is that purchase activity remains available, but volume growth will likely depend on the industry's ability to navigate a market where even modest shifts in borrowing costs can quickly influence buyer behavior.
*This article was primarily written by a human author. AI tools were used in a limited capacity for research assistance or light editing.
