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Home Sales Post Rare May Decline: Redfin

David Krechevsky
Jun 20, 2022
Redfin Home Sales YOY

Rising mortgage rates cause home sales to fall in May for only the second time on record, while home prices saw the smallest May increase on record.

KEY TAKEAWAYS
  • Seasonally adjusted home sales in May totaled 556,200, down 3% from April, the only month-over-month decline in May on its record outside of May 2020.
  • The inventory of homes for sale still fell 0.7% from April and were down 4.3% from a year earlier.
  • Home prices in May rose 1.5% from a month earlier, the smallest month-over-month increase for any May in Redfin’s records.

Redfin, the technology-powered real estate brokerage, has been tracking home sales and prices since 2012. In all that time, it has recorded a decline in sales in May from a month earlier just once.

Until last month, that is.

According to the latest report from Redfin, seasonally adjusted home sales in May totaled 556,200, down 3% from April, the only month-over-month decline in May on its record outside of May 2020, when the start of the pandemic sent shockwaves through the housing market. Home sales also fell 10.2% from a year earlier.

May’s results followed the hottest March on record, which ended with early signs of a cooldown as more buyers were edged out by soaring mortgage rates, sky-high prices, and few new listings.

Despite the decline in demand last month, the inventory of homes for sale still fell 0.7% from April and were down 4.3% from a year earlier, Redfin said. As the market remains tight and new listings also decline, May saw the smallest drop in active listings since November 2019, it said.

Home prices in May rose 1.5% from a month earlier, but that was the smallest month-over-month increase for any May in Redfin’s records, the company said. Prices were still up 14.8% from a year earlier.

The housing market has cooled considerably as mortgage rates climbed to their highest levels since 2009, Redfin said. 

“The sudden and dramatic surge in mortgage rates has been a shock to the system for housing,” said Daryl Fairweather, Redfin’s chief economist. “With inflation still at 40-year highs, mortgage rates are likely to stay elevated for a while, so the market will have to adjust to this new reality.”

Fairweather said there is some good news: Cheap debt is no longer fueling unsustainable home price growth, “and existing homeowners are in a good position, holding record-high home equity with debt financed at record low mortgage rates.” 

“Homebuyers, however, are facing mortgage rates near 6%,” she added, “which means the housing-market slowdown will likely continue into the fall. But one silver lining is that homebuyers are facing less competition for the first time in two years.”

Here are the numbers at a glance:

Redfin Housing Market Summary May 2022

Here are some key metro-level highlights from the report:

Competition:

  • Indianapolis was the fastest sales market, with half of all homes pending sale in just four days, the same as last year. Denver; Omaha, Neb.; Oklahoma City, and Portland, Ore. were the next fastest markets, with five median days on market.
  • In San Jose, Calif., 84.5% of homes sold above list price, more than any other metro Redfin analyzed. Next came 83.6% in Oakland; 79.3% in Worcester, Mass.; 76.3% in San Francisco; and 76% in Rochester, N.Y.

Prices:

  • North Port, Fla. had the nation’s highest price growth, rising 30.5% since last year to $475,000. Tampa, Fla. was second at 28.1%;followed by Las Vegas (26.8%); Knoxville, Tenn. (25.9%); and Orlando (25.8%).
  • No metros saw price declines in May.

Sales:

  • Honolulu led the nation in year-over-year sales growth, up 5%, followed by Denver, up 4%, and El Paso, Texas, up 3.7%.
  • West Palm Beach, Fla., saw the largest decline in sales since last year, falling 25.5%, followed by Lake County, Ill. (-22.9%) and Anaheim, Calif. (-22.4%).

Inventory:

  • Elgin, Ill., had the highest increase in the number of homes for sale, up 35% year over year, followed by Chicago (18.9%) and Austin, Texas (15.6%).
  • Allentown, Pa., had the largest decrease in overall active listings, falling 46.3% since last May. It was followed by Greensboro, N.C. (-35.2%), Bridgeport, Conn. (-31.6%), and Hartford, Conn. (-29.3%).

Redfin Estimate:

  • Miami (48.4%) had the largest share of homes predicted to sell for below list price, according to Redfin Estimate data, followed by Baton Rouge, La. (40.6%) and Tulsa, Okla. (40.0%).
  • Sacramento, Calif. (90.8%) had the largest share of homes predicted to sell at or above list price, followed by Oakland (90.1%) and Worcester (89.6%).
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