Sales of existing homes tumbled last month for the fourth month in a row as housing became less affordable across the country.
Existing-home sales declined by 3.4% in May to a seasonally adjusted annual rate of 5.41 million, according to a report by the National Association of Realtors released Tuesday. Sales were down 8.6% from a year ago.
Additionally, the NAR said the median existing-home sales price rose to $407,600, up 14.8% for the 12 months ending in May. The hike marks 123 consecutive months of year-over-year price increases, the longest recorded streak.
Mortgage rates rose quickly over the past few months as the Federal Reserve conducted three interest rate hikes to curb inflation.
As of Tuesday, the average 30-year fixed-rate mortgage was 5.78%, up more than 2.8 percentage points from a year before. Last week, the Fed announced it would jack up its target interest rate (which is a different, very short-term rate) by a two-thirds of a percentage point, its most aggressive increase since 1994.
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“Home sales have essentially returned to the levels seen in 2019, prior to the pandemic, after two years of gangbuster performance,” said NAR Chief Economist Lawrence Yun.
“Further sales declines should be expected in the upcoming months given housing affordability challenges from the sharp rise in mortgage rates this year,” he added.
Homes for sale have also been in short supply. Total housing inventory at the end of May totaled 1,160,000 units, a 12.6% increase from April but down 4.1% from one year ago, according to the NAR.
The largest year-over-year median list price growth occurred in Miami, with prices increasing by a whopping 45.9%. Nashville, Tennessee, saw 32.5% growth, and Orlando, Florida, notched 32.4% price increases, according to data from realtor.com.
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The housing market is expected to continue to cool as the Fed hikes rates. Given that the central bank typically raises rates by a quarter of a percentage point, it has essentially conducted six standard rate hikes since the start of the year, to a target range of 1.5% to 1.75%.
The Fed has signaled it might conduct another historic 75 basis point hike following its next meeting in July, something that some investors fear could help tip the economy into a recession.
