Higher Interest Rates Hit Home Prices Again
U.S. existing-home prices fell in May from a year earlier by the most in more than 11 years
Updated June 22, 2023 1:26 pm ET
U.S. existing-home prices posted their biggest year-over-year decline in more than 11 years last month as rising interest rates continued to weigh on the housing market.
The national median existing-home price fell 3.1% in May from a year earlier to $396,100, the largest drop since December 2011, the National Association of Realtors said Thursday.
Existing-home sales, which make up most of the housing market, increased 0.2% in May from the prior month to a seasonally adjusted annual rate of 4.3 million, the National Association of Realtors said Thursday. May sales fell 20.4% from a year earlier.
The housing market has slowed in the past year and a half as mortgage rates pushed many buyers out of the market and prompted homeowners with low rates on their current mortgages to stay put. Existing-home sales have declined by about one-third since the start of 2022.
After the pandemic unleashed a buying frenzy that lifted home prices across the U.S., the housing market has settled into a period of falling prices. May marked the fourth straight month of annual price declines, something that hasn’t happened since 2012.
Even so, some economists expected that the losses would be bigger. But the supply of homes on the market remains low, keeping home prices from sliding that much. In some parts of the country, bidding wars are still common due to the low inventory of homes for sale. Home prices have fallen the most in the western half of the U.S., while prices continue to rise from a year earlier in many eastern markets.
Mortgage rates have fluctuated in recent months since hitting 20-year highs above 7% in October and November. The average rate for a 30-year fixed mortgage was 6.67% in the week ended June 22, according to Freddie Mac.
“Stable mortgage rates are leading to stable home sales,” said Lawrence Yun, NAR’s chief economist. “This is still a fast-moving market, even with the sales slump.”
Economists surveyed by The Wall Street Journal ahead of the release had estimated that sales of previously owned homes fell 0.7% in May from the prior month.
The housing-market slowdown is one of the biggest ways that the Federal Reserve’s actions to curb inflation by raising interest rates have affected consumers. The Fed kept rates unchanged this month but Chair Jerome Powell said Wednesday that additional increases are likely in the coming months.
The spring is typically the busiest season for home sales, because many families prefer to move over the summer before the start of the next school year.
Existing-home sales rose the most month-over-month in the West, up 2.6%, and in the South, up 1.5%, NAR said. Sales fell in the Midwest and Northeast.
Nicole and Alexander Dreher started looking to buy their first home in Denver at the start of 2022, but they lost out on seven offers to buyers who could pay cash or pay far above listing price. “It was just super competitive,” Alexander Dreher said. “This year was a much easier process.”
The Drehers put in an offer at under the listing price in May on a four-bedroom house that had been sitting on the market since February, and it was accepted.