Rising Rates & Homes Prices Push Sales to Historic Lows

Key Takeaways:

• Home Sales Near Historic Lows: Home sales in May fell to one of the lowest points in a decade, driven by rising mortgage rates and high home prices.

• Record High Home Prices: The median home sale price hit a record in May as home prices are now up 5.1% from one year before

• Price Cuts: Despite rising home prices, almost 20% of homes for sale in May had a price cut.

Rising mortgage rates and escalating home prices have driven home sales down to nearly historic lows in May, according to the latest analysis from Redfin, a national real estate brokerage.

Historic Lows: Home sales dropped by 1.7% month over month on a seasonally adjusted basis and fell 2.9% from the same period last year. This decline marks one of the lowest points for home sales in the past decade.

• This month was only surpassed only by October 2023, when mortgage rates surged to a 23-year high, and May 2020, when the onset of the COVID-19 pandemic halted the housing market, setting a record low.

Up & Up: The median home sale price in May reached an all-time high of $439,716, representing a 5.1% increase year over year.

• Concurrently, the average 30-year fixed mortgage rate climbed to 7.06%, up from 6.99% just one month earlier and 6.43% a year earlier. This rate is more than double the all-time low of 2.68% observed during the pandemic.

• Despite the rising prices, nearly one in five (19.2%) homes for sale in May experienced a price cut.

Listings Slowly Rise: New listings saw a slight uptick of 0.3% month over month and an 8.8% increase year over year. However, these figures remain approximately 20% below pre-pandemic levels, highlighting the ongoing shortage of available homes.

What They’re Saying: Elijah de la Campa, Redfin Senior Economist, commented on the current market dynamics, stating, “Sales are sluggish because high homebuying 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.”

The combination of high mortgage rates and elevated home prices continues to deter potential buyers and sellers, contributing to a sluggish housing market. As the summer progresses, market participants will be closely watching for any shifts in interest rates or price trends that could alleviate some of the current pressure.