US home sales in May dropped to one of the lowest levels in the past decade, according to a report by real estate brokerage Redfin (NASDAQ:RDFN), as both demand and supply remained sluggish in the current high-mortgage rate environment.
Housing affordability in the U.S. is at an all-time low. Median home prices have reached record highs, and the 30-year fixed-mortgage rate is hovering around 7%, significantly depressing both demand and supply. Home sellers are holding onto lower fixed mortgage rates secured during an era of cheap debt, making them reluctant to sell in today’s higher rate environment.
In May, 407,959 homes were sold. This is one of the lowest monthly sales figures in the past decade, with only October 2023 (398,537) and May 2020 (369,300) recording fewer sales. Home sales fell 1.7% month-over-month on a seasonally adjusted basis and dropped 2.9% from a year earlier.
Meanwhile, the median home sale price rose to a record high of $439,716, up 1.6% month-over-month and 5.1% year-over-year. Seasonally adjusted new listings rose 0.3% month-over-month in May and 8.8% from a year earlier but remained roughly 20% below pre-pandemic (May 2019) levels.
“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.
Homebuilder stocks surged in 2023 due to tighter supply leading to higher sales. However, the rally has since lost momentum. PulteGroup Inc (NYSE:PHM) is up 11.8% year-to-date, D.R. Horton Inc (NYSE:DHI) is down 5.61%, and Lennar Corp (NYSE:LEN) is up 4.03%.
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