Existing-Home Sales Stifled By Lack Of Inventory, Unaffordability

Existing-home sales continue to be stifled by “twin” market dynamics, and First American expects them to slow through the month.

The company’s Existing-Home Sales Outlook “nowcasts” sales based on the historical relationship between sales, demographic trends, house-buying power, and the prevailing financial and economic conditions.

For May, the company expects to see sales down YOY and even with April.

“For the remainder of 2024, existing-home sales may increase slightly over last year, especially if mortgage rates fall and inventory continues to rise. However, without a boost in affordability and more existing-home inventory any sales momentum is likely to stall,” deputy chief economist Odeta Kushi wrote in the report.

“Double-edged” rates are now keeping the cost of homeownership high, and elevated borrowing costs are forcing potential sellers to stay in their current homes. 

Inventory has recently improved, however, as some sellers find they simply can’t wait any longer to move and more buyers flee the market.

But overall home sales took a major hit in May, as the median U.S. home price hit another record high. They were down 1.7% from April on a seasonally adjusted basis, according to new data from Redfin, and sank 2.9% YOY.

In the past ten years, there have only been two months with fewer sales than this: October 2023, when rates hit a 23-year high, and May 2020, when the pandemic began.

“Buyers today are facing many of the realities of a hot market even though few homes are changing hands,” said Redfin Senior Economist Elijah de la Campa.

“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.”

More “stale” listings– homes that have been on the market for more than 30 days– are emerging, and price cuts are becoming more common among sellers. Nearly one in five homes for sale last month got a price trim, just under the record high number of price cuts set in October 2022.