Existing-homes sales in the U.S. rose 2.8% month over month in May to their highest level since October 2022, according to a new report from Redfin.
Overall home sales, including existing and newly built homes, also rose to their highest level since October 2022, increasing 3.8% month-over-month. While closed sales surged, pending sales flattened as mortgage rates rose, Redfin noted.
The online brokerage noted that there are several reasons home sales hit their highest level in nearly four years in May:
- Mortgage rates dipped. They dropped down to the 6.3% range for much of April after spiking in March. Sales that closed in May were made up of homebuying contracts that were signed—and rates that were locked in—during April.
- It’s a buyer’s market. There were hundreds of thousands more home sellers than buyers, allowing buyers to negotiate price reductions and seller concessions, helping deals cross the finish line despite high costs. Additionally, the labor market improved, making many Americans feel more confident about making a big purchase.
- The Bay Area’s hot market contributed to the nationwide uptick in sales. In San Jose, for example, home sales rose 26% year over year in May, and in San Francisco they increased 19%. The AI boom is driving fierce homebuying demand in the Bay Area as employees of AI companies collect big salaries and bonuses.
- South Florida also contributed. Closed home sales surged 18% year over year in West Palm Beach, Florida, a market that’s typically driven by luxury buyers who are less concerned about high costs and economic jitters.
While closed home sales rose in May, sales of pending homes were mostly flat (0.1%) month over month. Sales that closed in May are a backwards-looking indicator, Redfin noted, reflecting the period when mortgage rates fell temporarily in April.
Economic, Global Uncertainty
Redfin noted that economic and global uncertainty also scared off would-be buyers: The ongoing Iran war and closure of the Strait of Hormuz, AI-driven inflation and the possibility of interest-rate hikes all came together to paint a muddy financial picture.
The brokerage noted that new listings rose 1.4% month over month to their highest level since 2022. New listings increased partly because sellers noticed improving homebuying demand in April and hoped to take advantage of it, Redfin said.
The total number of homes for sale rose 0.4% from a month earlier, to their highest level since 2020. Total inventory is at a six-year high because in addition to new sellers, Redfin said there are many stale listings on the market after a sluggish start to the year.
Redfin noted that high inventory is another reason home sales hit their highest level in nearly four years in May. When there are more homes on the market, there are more options for homebuying deals.
The median U.S. home sale price increased 2% year over year in May to $398,771, Redfin said. Prices kept going up because there were more homebuyers closing deals.
And, just under three in five (59.8%) homes that sold in May went for less than their original list price. That’s a slightly smaller share than the month before, Redfin said, and it marks the sixth straight month in which this share has declined.
Still Scoring Discounts
That means that while most homebuyers are still scoring discounts, it is becoming a little less common. Discounts are becoming a bit less common because while it’s still a big buyer’s market, the advantage buyers have over sellers has started shrinking.
Another reason is that sellers are pricing their homes more realistically from the start, Redfin said.
