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FairfaxPublic SafetyHomes market cools, but prices hit new heights

Homes market cools, but prices hit new heights

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The national homes market may be perilously close to rocky shoals, but prices hit a landmark in May.

The median existing-home price for all housing types in May was $407,600, up 14.8 percent from May 2021 ($355,000), as prices increased in all regions, according to data reported by the National Association of Realtors.

This marks 123 consecutive months of year-over-year price increases, the longest-running streak on record, the organization said.

But a combination of inventory challenges, interest-rate hikes and the aforementioned record costs for homes appear to be sending some prospective purchasers scurrying out of the market.

Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – fell 3.4 percent from April to a seasonally adjusted annual rate of 5.41 million in May. Year-over-year, sales receded 8.6 percent.

“Further sales declines should be expected in the upcoming months, given housing-affordability challenges from the sharp rise in mortgage rates this year,” said NAR chief economist Lawrence Yun. “The housing market is clearly undergoing a transition. Contract signings are down sizably from a year ago because of much higher mortgage rates.”

“Nonetheless, homes priced appropriately are selling quickly and inventory levels still need to rise substantially – almost doubling – to cool home price-appreciation and provide more options for home buyers.”

Among the different regions of the country:

• Existing-home sales in the Northeast climbed 1.5 percent from April to May to an annual rate of 680,000, falling 9.3 percent from May 2021. The median price in the Northeast was $409,700, a 6.7-percent rise from one year ago.

• Existing-home sales in the Midwest dropped 5.3 percent from the previous month to an annual rate of 1,240,000 in May, slumping 7.5 percent from May 2021. The median price in the Midwest was $294,500, up 9.5 percent from one year before.

• Existing-home sales in the South declined 2.8 percent in May to an annual rate of 2,410,000, down 8.4 percent from the previous year. The median price in the South was $375,000, a 20.6-percent jump from one year ago. (For the ninth consecutive month, the South recorded the highest pace of price appreciation in comparison to the other three regions.)

• Existing-home sales in the West slid 5.3 percent compared to the month before to an annual rate of 1,080,000 in May, down 10 percent from this time last year. The median price in the West was $633,800, an increase of 13.3 percent from May 2021.

Total housing inventory registered at the end of May was 1.16 million units, an increase of 12.6 percent from April but still 4.1 percent below a year before. Unsold inventory sits at a 2.6-month supply at the current sales pace, up from 2.2 months in April and 2.5 months in May 2021.

Properties typically remained on the market for 16 days in May, down from 17 days in April and 17 days in May 2021. Eighty-eight percent of homes sold in May 2022 were on the market for less than a month.

Realtor.com’s Market Trends Report in May shows that the largest year-over-year median list-price growth occurred in Miami (+45.9%), Nashville (+32.5%), and Orlando (+32.4%). Austin reported the highest growth in the share of homes that had their prices reduced compared to last year (+14.7 percentage points), followed by Las Vegas (+12.3 percentage points) and Phoenix (+11.6 percentage points).

Figuring out where the market may go next requires steady nerves and perhaps some Dramamine.

“Declining home purchases means more people are renting, and the resulting rent-price escalation may spur more institutional investors to buy single-family homes and turn them into rental properties – placing additional financial strain on prospective first-time homebuyers,” said NAR president Leslie Rouda Smith, a Realtor from Plano, Texas, and a broker associate at Dave Perry-Miller Real Estate in Dallas.

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