U.S. home sales collapse in May due to higher rates and record prices, Redfin says

(Reuters) – U.S. home sales fell to their lowest levels in a decade in May, according to the real estate brokerage. red fin (RDFN) said in a reportas demand and supply remained sluggish in a high mortgage rate environment.

WHY IT IS IMPORTANT

Housing affordability in the United States is at an all-time low. Median home prices are at record highs and the 30-year fixed mortgage rate is hovering around 7%. This caused both demand and supply to fall.

The number of homes for sale remains about 25% below pre-pandemic levels, according to Redfin.

Home sellers are keeping guaranteed lower fixed mortgage rates on properties in an era of cheap debt, in the face of higher rates now.

In May, 407,959 homes were sold. According to Redfin data, only October 2023 (398,537) and May 2020 (369,300) over the past decade have seen fewer home sales than last month.

IN NUMBERS

Home sales fell 1.7% month-over-month in May on a seasonally adjusted basis and 2.9% from a year earlier, while the median home sales price reached a record high of $439,716, up 1.6% month-over-month and 5.1%. year over year, according to Redfin.

Seasonally adjusted new listings increased 0.3% month-over-month in May and 8.8% year-over-year. However, they were around 20% lower than pre-pandemic levels (May 2019).

KEY QUOTE

“Sales are slow because the high costs of buying a home make house hunters and potential sellers nervous. And with so few homes for sale, buyers in some markets are getting into bidding wars , which is helping to push home prices to record highs,” Redfin Senior said. The economist Elijah de la Campa.

MARKET REACTION

Shares of homebuilders surged in 2023 as tighter supply led to higher sales. However, the recovery has since lost momentum.

Pultegroup Inc is up 11.8% year to date, DR Horton Inc is down 5.61% and Lennar Corp is up 4.03%.

(Reporting by Ananta Agarwal; Editing by Sriraj Kalluvila)