Home sales fall for fourth straight month as affordability squeezes buyers out

Sales of existing homes dropped for the fourth straight month due to a very low supply of homes on the market.

Existing home sales fell 0.9 percent in May from the previous month to a seasonally adjusted annualized rate of 5.8 million units, according to the National Association of Realtors. That is the fourth straight month of declines. The 5.8 million rate is modestly above pre-pandemic levels.

Sales were 44.6 percent higher from the same period a year ago, but that comparison is skewed massively, given that the housing market basically shut down for about two months at the start of the pandemic. The market then rebounded dramatically last summer and remained strong for all of last year.

“Sales are essentially returning towards pre-pandemic activity,” said Lawrence Yun, chief economist for NAR. “Lack of inventory continues to be the overwhelming factor holding back home sales, but falling affordability is simply squeezing some first-time buyers out of the market.”

There were just 1.23 million homes for sale at the end of May, a 20.6 percent drop from a year ago. At the current sales pace that represents a 2.5-month supply.

Very low inventory amid high demand continues to fuel extraordinary price increases. The median price of an existing home in May was $350,300, a 23.6 percent increase compared with May 2020. That is not only the highest median price ever recorded but also the strongest annual appreciation ever.

Prices are, however, skewed by the mix of sales. The market is now tilted toward the upper end, where there is far more supply of homes for sale. For example, sales of homes priced between $100,000 and $250,00 dropped 2 percent from a year ago, while sales of homes priced between $750,000 and $1 million jumped 178 percent.

Sales declined in every geographical area except in the Midwest, where homes are priced the lowest.

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