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Illustration by Lanette Behiry/Real Estate News

Home prices soar even as sales, construction slow 

The median sale price for existing homes hit a record $419,300 in May, NAR reported, but home sales were lackluster and new construction has cooled.

June 21, 2024
3 minutes

Another month, another record: According to new data from the National Association of Realtors, the median existing home price in May was up 5.8% year-over-year to $419,300, the highest price ever recorded by NAR. It was the eleventh consecutive month of annual gains, despite a slight decline in sales.

Meanwhile, new construction — which has helped fill the inventory gap in hot housing markets across the country — slowed in May. Permits, starts and new home completions all declined in May from the previous month as builder sentiment also took a hit in recent weeks. 

Existing home sales dipped: May sales were down 0.7% compared to April and fell 2.8% year-over-year to a seasonally adjusted annual rate of 4.11 million, NAR reported. 

Regionally, sales fell in the South between April and May but remained steady in the Northeast, Midwest and West. 

Compared to a year ago, sales were up in the Midwest but fell elsewhere, with the biggest annual declines in the South (5.1%) and Northeast (4%). The Northeast also posted the most significant price increase, with median existing home sale prices up 9.2% year-over-year.

Inventory continues to improve: As existing sales slow — likely due to a combination of high prices and mortgage rates which, though trending down, remain near 7% — inventory has improved. There were 1.28 million homes for sale in May, NAR reported, up 6.7% from the previous month and a gain of 18.5% year-over-year. The current housing stock represents 3.7 months worth of unsold inventory, up from 3.5 months in April and 3.1 months a year ago.

The improvement in inventory could benefit buyers, who are getting some relief with declining mortgage rates and more homes with price reductions

Affordability is still a major concern: Even though inventory has improved, rising prices have greatly impacted affordability for many would-be buyers.

"Home prices reaching new highs are creating a wider divide between those owning properties and those who wish to be first-time buyers," NAR Chief Economist Lawrence Yun said in the May report. "The mortgage payment for a typical home today is more than double that of homes purchased before 2020. Still, first-time buyers in the market understand the long-term benefits of owning."

New construction is cooling: More housing stock could lead to improved affordability, but the latest U.S. Census data showed across-the-board declines in construction from April to May. 

Even as the share of new homes has increased dramatically in recent years, that's largely due to a decline in existing home inventory. A recent Zillow report found that the U.S. is still suffering from a persistent housing deficit despite a boom in construction in 2022. "While the pace of construction has shown signs of life of late, it will still need to accelerate significantly in order to have any hope at making a meaningful change." 

There was no acceleration in May, however, as permits (down 3.8%), starts (down 5.5%) and new home completions (down 8.4%) all dipped from the previous month, suggesting that the pace of new home production may continue to fall. On an annual basis, housing completions were up slightly, but permits and starts were down significantly year-over-year.

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