Dropping to their third-lowest rate in a decade this May, home sales are feeling the impact of high mortgage rates and lacking inventory a new report from Redfin reveals.
The real estate brokerage reported that home sales fell 1.7% from April to May – a decrease of 2.9% year over year. There have only been two instances with fewer home sales in the past 10 years – Oct. 2023, when mortgage rates jumped to a 23-year high, and May 2020, around the beginning of the pandemic.
“Buyers today are facing many of the realities of a hot market even though few homes are changing hands,” commented Redfin Senior Economist Elijah de la Campa. “Sales are sluggish because high home buying 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.”
Sales could pick up later this year if mortgage rates slowly tick down as expected, analysts said. It’s possible that descent has already begun, as daily average mortgage rates fell to their lowest level in about three months last week following news of cooling inflation via the latest CPI report.
And yet, Fannie Mae's most recent Home Purchase Sentiment Index (HPSI) showed most consumers believe it's not a good time to buy or sell a house.
The median home sale price rose 5.1% year over year in May to a record $439,716, just as the average 30-year-fixed mortgage rate hit 7.06%. That rate is up from 6.99% one month earlier and 6.43% one year earlier, and more than double the all-time low of 2.68%, achieved during the pandemic.
Even though homes prices are higher than ever, some sellers are now opting to lower their listing price since the typical home spent an average 32 days on the market. That’s the longest span of any May since the start of the pandemic.
Nearly one in five (19.2%) homes for sale in May had a price cut, up from 13.2% a year earlier and just shy of the 21.7% record high set in October 2022. Price drops are more common in states like Florida and Texas, where homebuilders have ramped up their output in recent years.
New listings rose 0.3% month over month in May on a seasonally adjusted basis and climbed 8.8% from a year earlier. Still, they were roughly 20% below pre-pandemic levels, circa May 2019. Active listings, or the total number of homes for sale, rose 0.4% month over month on a seasonally adjusted basis and jumped 11.1% from a year earlier – the largest annual gain since early 2023, but still about 25% below pre-pandemic levels.
Regionally, active listings are surging along Florida’s southwest Gulf Coast. In the city of North Port, for example, they rose 51.1% YOY on an unadjusted basis – the largest increase across the U.S. Tampa and Cape Coral followed closely, with active listings rising 46% and 45.1% in those locales, respectively.
It’s no surprise then, that three of the 10 metros with the highest shares of price drops are in Florida. Another three are in Texas.
Active listings fell the most sharply in New Brunswick, NJ (-8.1%), Chicago (-7.3%) and Raleigh, NC (-5.5%).
New listings rose most in San Jose, CA (32.7%), Seattle (31.2%) and Denver (31.1%). They fell most in Atlanta (-7.7%), New Orleans (-4.4%) and Greensboro, NC (-4.3%).
In Rochester, NY, 77.1% of homes sold above their final list price, the highest share among the metros Redfin analyzed. Next came San Jose (76.1%) and Oakland, CA (68.4%). The shares were lowest in North Port (5.9%), West Palm Beach, FL (8.1%) and Cape Coral (8.6%).
