Home prices rose 1.5% month over month in May, their smallest increase of any May in Redfin’s records, which go back to 2012, according to a new report. The housing market cooled considerably as mortgage rates climbed to their highest levels since 2009.
Seasonally adjusted home sales fell 3% month over month, their only May decline on record outside of 2020, when the start of the pandemic sent shockwaves through the housing market. Despite this decline in demand, the inventory of homes for sale still fell from a year earlier. As the market remains tight and new listings also decline, May saw the smallest drop in active listings since November 2019.
The median sale price in May was $430,600, a month-over-month gain of 1.5% and a year-over-year rise of 14.8%. Homes sold (seasonally adjusted) were 556,200, a drop of -3% and -10.2%. Pending sales (seasonally adjusted) were 516,500, a gain of 0.3% and drop of -9.2%. New listings (seasonally adjusted) were 614,200, an increase of 0.8% and decrease of -4.5%, respectively.
“The sudden and dramatic surge in mortgage rates has been a shock to the system for housing,” observes Daryl Fairweather, Redfin’s chief economist. “With inflation still at 40-year highs, mortgage rates are likely to stay elevated for a while, so the market will have to adjust to this new reality. The good news is that cheap debt is no longer fueling unsustainable home price growth, and existing homeowners are in a good position, holding record high home equity with debt financed at record low mortgage rates. Homebuyers however are facing mortgage rates near 6 percent, which means the housing-market slowdown will likely continue into the fall, but one silver lining is that homebuyers are facing less competition for the first time in two years.”
Indianapolis was the fastest market, with half of all homes pending sale in just 4 days, the same as a year earlier. The next fastest markets, with 5 median days on market, were Denver, Colo.; Omaha, Neb; Oklahoma City, Okla.; and Portland, Ore.
In San Jose, Calif., 84.5% of homes sold above list price, more than any other metro Redfin analyzed. Next came 83.6% in Oakland, Calif.; 79.3% in Worcester, Mass; 76.3% in San Francisco, Calif.; and 76.0% in Rochester, N.Y.
North Port, Fla. had the nation’s highest price growth, rising 30.5% since last year to $475,000. Tampa, Fla. came next at 28.1%, followed by Las Vegas, Nev. (26.8%); Knoxville, Tenn. (25.9%); and Orlando, Fla. (25.8%). No metros saw price declines in May.
Honolulu led the nation in year-over-year sales growth, up 5%, followed by Denver, up 4%. El Paso, Texas rounded out the top three, with sales up 3.7%.
West Palm Beach, Fla. saw the largest decline in sales since last year, falling 25.5%. Next came Lake County, Ill. (-22.9%) as well as Anaheim, Calif. (-22.4%).
Elgin, Ill. had the highest increase in the number of homes for sale, up 35% year over year, followed by Chicago, Ill. (18.9%) and then Austin, Texas (15.6%).
Allentown, Pa. had the largest decrease in overall active listings, falling 46.3% since last May. It was followed by Greensboro, N.C. (-35.2%); Bridgeport, Conn. (-31.6%); and Hartford, Conn. (-29.3%).
Miami (48.4%) had the largest share of homes predicted to sell for below list price, according to Redfin Estimate data, followed by Baton Rouge, La. (40.6%) and then Tulsa, Okla. (40%).
Sacramento, Calif. (90.8%) had the largest share of homes predicted to sell at or above list price, followed by Oakland, Calif. (90.1%) and then Worcester, Mass. (89.6%).
View the full report here.