May home sales barely increase due to high mortgage rates and prices, impacting affordability

From Yahoo Finance: 2025-06-23 10:03:00

Sales of existing U.S. homes rose 0.8% in May with a seasonally adjusted annual rate of 4.03 million units. However, sales fell 0.7% compared to the previous year, attributing the slowdown to affordability issues due to high mortgage rates and rising prices.

Home prices continued to rise, reaching an all-time high of $422,800 in May, marking the 23rd consecutive month of annual growth. The sluggish sales activity is linked to affordability concerns, according to Lawrence Yun, NAR’s chief economist.

The U.S. housing market has been in a slump since early 2022, exacerbated by increasing mortgage rates. Despite a slight drop from a high of over 7% earlier this year, rates have remained a challenge for prospective homebuyers, impacting affordability.

Prospective homebuyers are facing hurdles due to elevated mortgage rates and rising prices, leading to the need for higher down payments. The median U.S. home sales price has increased by 52% since May 2019, while the median annual income has only risen by 30% in the same period.

Buyers needed an annual income of $91,960 to afford a typical home with a 20% down payment in May, nearly 87% more than in 2019. Despite the challenges, home shoppers who can afford current mortgage rates have benefited from a wider selection of properties on the market.

The inventory of unsold homes at the end of May increased by 6.2% from April, totaling 1.54 million units. This represents a 20.3% increase from the previous year but remains below pre-pandemic levels. The month-end inventory translates to a 4.6-month supply at the current sales pace.

Read more: May home sales barely move as high mortgage rates, prices, weigh on housing market