May 2024 Existing-Home Sales
Existing-home sales slip modestly, as prices rise
dipped in May, dropping 0.7% from a month ago to a pace of 4.11 million, trailing the May 2023 seasonally adjusted annual rate of sales by 2.8%.
These closings were most directly affected by surging mortgage rates in March and April as inflation picked up. Despite weaker sales, the median sales price rose 5.8% in May, to $419,300, a new all-time high.
Regionally, sales were flat in May in all regions except the South (-1.6%), while sales were lower from a year ago in all regions except the Midwest (+1.0%). Median sales prices rose in all four regions, between 3.6% and 9.2%.
Market balancing at low level of activity
The combination of high home prices and elevated mortgage rates has proved to be challenging for the housing market, weighing down sales activity. Despite record-high home equity, existing homeowners have largely avoided moving to hold on to their existing low mortgage rate.
In fact, 87% of mortgages are locked in at less than 6%, a percentage point or more below today’s roughly 7% mortgage rate. This has kept a relative balance between supply and demand, which are both feeling interest rate effects.
Months supply edged up to 3.7 months on slower sales and growing inventory, closer to the 4 to 6 months that is typically consistent with a balanced market. For now, the housing market is still in seller-friendly territory, helping push prices higher.
Lower rates could boost first-time shoppers who haven’t already extended a lease
Looking ahead, an improvement in May inflation has brought some mortgage rate relief even though the Fed still wants to see additional evidence before easing the Fed Funds rate. Additional inflation relief will likely improve mortgage rate prospects for home shoppers later this year, but it might be too little too late for some would-be first-time homebuyers who have likely chosen to take advantage of easing rents, a factor behind the slipping homeownership rates for younger households.
According to the National Association of Big gaming®, first-time buyers purchased 31% of sales in May, down from 33% in April. However, the share of first-time homebuyers was up from 28% one year ago. Home shoppers who persist could see better conditions in the second half of the year, which tends to be somewhat less competitive seasonally, and might be even more so since inventory is likely to reach five-year highs.
What this data means
A dip in market competitiveness could make it easier for veterans and military households hoping to take advantage of a Veterans Affairs mortgage loan, a benefit established on June 22, 1944, as part of the GI Bill.
VA loans enable military homebuyers by offering zero-down payment requirements and favorable terms such as lower mortgage rates. Already, some housing markets tend to see greater usage of VA lending among military households, and Realtor.com® used this stat along with a handful of other criteria to identify the Top Military-Friendly Housing Markets, which include Des Moines, IA, Augusta, GA, and Columbia, SC.