Home sales fall for fourth consecutive month as interest rates rise
SSales of existing homes fell last month for the fourth month in a row as homes became less affordable across the country.
Sales of existing homes fell 3.4% in May to a seasonally adjusted annual rate of 5.41 million, according to a National Association of Realtors report released Tuesday. Sales were down 8.6% from a year ago.
Additionally, the NAR said the median sale price for existing homes rose to $407,600, up 14.8% for the 12 months ending May. The rise marks 123 straight months of year-over-year price increases, the longest streak on record.
Mortgage rates have risen rapidly in recent months as the Federal Reserve made three interest rate hikes to rein in inflation.
On Tuesday, the average 30-year fixed-rate mortgage was 5.78%, up more than 2.8 percentage points from a year earlier. Last week, the Fed announced that it would increase its target interest rate (which is a different very short-term rate) by two-thirds of a percentage point, its most aggressive increase since 1994.
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“Home sales have essentially returned to pre-pandemic 2019 levels after two years of stunning performance,” said NAR chief economist Lawrence Yun.
“Further declines in sales should be expected in the coming months given housing affordability issues related to the sharp rise in mortgage rates this year,” he added.
Homes for sale were also scarce. Total housing inventory at the end of May stood at 1,160,000 units, up 12.6% from April but down 4.1% from a year ago, according to the NARR.
The strongest year-over-year median price growth occurred in Miami, with prices rising 45.9%. Nashville, Tennessee saw 32.5% growth and Orlando, Florida saw a price increase of 32.4%, according to data from realtor.com.
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The housing market is expected to continue to cool as the Fed raises rates. Since the central bank typically raises rates by a quarter of a percentage point, it has essentially made six standard rate hikes since the start of the year, within a target range of 1.5% to 1.75 %.
The Fed has signaled it could make another historic 75 basis point hike after its next meeting in July, which some investors fear could tip the economy into a recession.