US home sales crumble in May on higher rates and record prices, says Redfin

US home sales in May fell to among the lowest levels in the past decade, real estate brokerage Redfin said in a report, as both demand and supply remained sluggish in a high-mortgage rate environment.

WHY IT'S IMPORTANT

Housing affordability in the US is at an all-time low. Median home prices have scaled record highs and the 30-year fixed mortgage rate is hovering at around 7%. This has depressed both demand and supply.

The number of homes for sale remains roughly 25% below pre-pandemic levels, according to Redfin.

Home sellers are holding onto lower fixed mortgage rates secured on properties during an era of cheap debt in the face of higher rates currently.

In May, 407,959 homes were sold. Only October 2023 (398,537) and May 2020 (369,300) in the past decade have recorded fewer home sales than last month, as per Redfin data.

BY THE NUMBERS

Home sales fell 1.7% month-over-month in May on a seasonally adjusted basis and dropped 2.9% from a year earlier, while median home sale price rose to a record high of $439,716, up 1.6% month-over-month and 5.1% year-over-year, as per Redfin.

Seasonally adjusted new listings rose 0.3% month-over-month in May and 8.8% from a year earlier. Still, they were roughly 20% below pre-pandemic (May 2019) levels.

KEY QUOTE

"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," said Redfin Senior Economist Elijah de la Campa.

MARKET REACTION

Homebuilder stocks surged in 2023 as tighter supply led to higher sales. However, the rally has since lost momentum.