Home Sales Hit Record Lows: What's Driving Prices Sky-High and How to Navigate the Market

Home Sales Plummet in May: What It Means for Buyers and Sellers

The Current Housing Market Trends: Understanding the Decline

Home sales in May have reached one of the lowest levels on record. Only two months in the past decade have seen fewer sales. High home prices, elevated mortgage rates, and a continuing housing shortage are driving this trend. The median U.S. home sale price hit a record high in May, with demand outpacing supply, and the number of homes for sale is roughly 25% below pre-pandemic levels. Despite this, about one in five sellers cut their list prices as homes in many areas linger on the market.

The Impact of High Home Prices and Mortgage Rates

The median home sale price rose 5.1% year-over-year in May to a record $439,716. The average 30-year-fixed mortgage rate hit 7.06%, up from 6.99% the previous month and 6.43% a year earlier. This rate is more than double the all-time low of 2.68% during the pandemic. While homes are selling for more than ever, many sellers are still reducing their list prices, providing a potential silver lining for buyers.

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Why Are Sellers Cutting Prices?

Nearly one in five homes for sale in May faced a price cut, up from 13.2% a year earlier. This is just shy of the 21.7% record high set in October 2022. Sellers are often reducing prices because they initially listed their homes too high, leading to extended time on the market. The typical home for sale in May spent 32 days on the market, the highest level for any May since the start of the pandemic.

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Price Reductions More Common in Some Areas

Price cuts are especially prevalent in areas where housing supply is increasing rapidly, like Florida and Texas. Here, individual home sellers face stiff competition from homebuilders. These regions are experiencing a cooling market amid a boom in new construction, intensifying natural disasters, and soaring insurance costs.

The Housing Shortage: Improving Yet Severe

New listings rose 0.3% month-over-month in May on a seasonally adjusted basis and climbed 8.8% from a year earlier. However, they remain roughly 20% below pre-pandemic levels. Many homeowners are hesitant to sell because they are "locked in" by the low mortgage rates they secured during the pandemic.

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Active Listings and Market Dynamics

Active listings, representing the total number of homes for sale, rose 0.4% month-over-month and jumped 11.1% from a year earlier—the largest annual gain since early 2023. However, active listings are still about 25% below pre-pandemic levels. Homes lingering on the market contribute to the rise in active listings, as they become stale.

Regional Highlights and Market Shifts

Active listings are soaring along Florida’s southwest Gulf Coast. In North Port, they surged 51.1% year-over-year, the largest increase in the nation. Tampa (46%) and Cape Coral (45.1%) followed. These housing markets are cooling faster than anywhere else in the country.

Conversely, markets like Rochester, NY, are holding up better and seeing price increases due to their affordability and near-record-low supply.

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Metro-Level Data Insights

Examining metro-level data provides further insights into the market's dynamics:

• Prices: Median sale prices rose the most in Anaheim, CA (17.6%), Cleveland (15.1%), and Nassau County, NY (14.2%). They fell the most in Cape Coral, FL (-2.7%), Honolulu (-2.1%), and Austin, TX (-1.1%).
• Price Cuts: Indianapolis saw the highest share of listings with a price drop (48.1%), followed by Tampa, FL (45.2%), and Denver (44.8%). The lowest shares were in Newark, NJ (13.4%), Lake County, IL (15%), and Milwaukee (15.2%).
• New Listings: San Jose, CA, saw the most significant increase in new listings (32.7%), followed by Seattle (31.2%) and Denver (31.1%). They fell the most in Atlanta (-7.7%), New Orleans (-4.4%), and Greensboro, NC (-4.3%).
• Active Listings: North Port, FL, had the largest increase in active listings (51.1%), followed by Tampa (46%) and Cape Coral (45.1%). They fell the most in New Brunswick, NJ (-8.1%), Chicago (-7.3%), and Raleigh, NC (-5.5%).
• Closed Home Sales: San Jose saw the highest increase in closed home sales (16.6%), followed by Minneapolis (11.7%) and San Francisco (10.5%). They fell the most in Stockton, CA (-15.4%), Buffalo, NY (-15.3%), and San Antonio (-14.3%).
• Sold Above List Price: Rochester, NY, had the highest share of homes sold above their final list price (77.1%), followed by San Jose (76.1%) and Oakland, CA (68.4%). The lowest shares were in North Port (5.9%), West Palm Beach, FL (8.1%), and Cape Coral (8.6%).

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Navigating the Current Market

The housing market is in a state of flux, with high prices and mortgage rates deterring both buyers and sellers. However, opportunities exist, particularly for those looking to take advantage of price reductions in certain areas. As the market continues to evolve, staying informed and flexible will be crucial for both buyers and sellers.

If you have any questions or need assistance navigating this complex market, I am here to help. As a professional real estate agent, I would love to connect with you and provide personalized guidance. Feel free to reach out for a call to discuss your needs and how I can assist you.

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