U.S. existing home sales dropped to a two-year low in May as prices jumped to a record high, the National Association of Realtors said on Tuesday.
Existing home sales fell 3.4% to a seasonally adjusted annual rate of 5.41 million units in May, the lowest level since June 2020.
The drop in prices comes as mortgage interest rates increased are still affecting first-time buyers.
Existing home sales results are based on contracts signed mostly in March and April, when the average rate on the 30-year fixed mortgage rose from around 4% to 5.5%.
Chief economists at the National Association of Realtors are anticipating a further decline in home sales, since the impact of higher mortgage rates are not yet fully reflected in the data.
“Higher short-term rates from the Fed are helping to drive a much-needed housing reset – a real estate refresh,” wrote Danielle Hale, chief economist at Realtor.com. “While the rebalancing is needed, it’s upping the challenge of navigating the housing market for both sellers and buyers as expectations and conditions are adjusting rapidly.”
Sales were 8.6% lower than in May 2021. April’s sales were revised slightly lower. This is the weakest report since June 2020, since the early months of the Covid pandemic.
Even as home sales slowed, home prices kept climbing in May. The national median home price jumped 14.8% in May from a year earlier to an all-time high $407,600.