Home sales fell 1.7 percent month-over-month in May on a seasonally adjusted basis and dropped 2.9 percent from a year earlier, according to a new report from Redfin.
There have been just two months in the past decade with fewer home sales: October 2023, when mortgage rates jumped to a 23-year high, and May 2020, when the onset of the pandemic brought the housing market to a halt and home sales to a record low.
“Buyers today are facing many of the realities of a hot market even though few homes are changing hands,” Redfin Senior Economist Elijah de la Campa said in a release. “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 median home sale price rose 5.1 percent year-over-year in May to a record $439,716. The average 30-year-fixed mortgage rate hit 7.06 percent. That’s up from 6.99 percent one month earlier and 6.43 percent one year earlier and is more than double the all-time low of 2.68 percent during the pandemic. Daily average mortgage rates did drop to their lowest level in about three months this week after the latest CPI report showed that inflation is continuing to cool.
Even though homes are selling for more than ever before, many sellers are still having to lower their list prices after putting their homes on the market — one silver lining for buyers.
Nearly one in five (19.2 percent) homes for sale in May had a price cut, up from 13.2 percent a year earlier and just shy of the 21.7 percent record high set in October 2022.
Some sellers are reducing their prices because they listed their home for too much initially and it ended up sitting on the market. The typical home for sale in May spent 32 days on the market. While that’s comparable with a year earlier, it’s the highest level for any May since the start of the pandemic.
Price drops are particularly common in areas where housing supply has been rising quickly, like Florida and Texas. In these areas, individual homesellers have been facing strong competition from homebuilders.
New listings rose 0.3 percent month-over-month in May on a seasonally adjusted basis and climbed 8.8 percent from a year earlier. Still, they were roughly 20 percent below pre-pandemic (May 2019) levels. That’s largely because many homeowners don’t want to sell, as they feel “locked in” by the low mortgage rate they scored during the pandemic, according to Redfin.
Active listings, or the total number of homes for sale, rose 0.4 percent month-over-month on a seasonally adjusted basis and jumped 11.1 percent from a year earlier — the largest annual gain since the start of 2023. Still, active listings were about 25 percent below pre-pandemic levels.
While new listings represent the number of homes that were listed for sale during a given month, active listings represent the total number of homes that were for sale during a given month. That means that the latter metric includes homes that aren’t selling. One reason active listings have risen so much is that in some areas, homes are lingering on the market and getting stale.
Active listings are also soaring along Florida’s southwest Gulf Coast. In North Port, they surged 51.1 percent year-over-year on an unadjusted basis — the largest increase in the nation. Next came Tampa (46 percent) and Cape Coral (45.1 percent). Those housing markets are cooling faster than anywhere else in the country amid a new-construction boom, intensifying natural disasters and soaring insurance costs, a separate Redfin report found.