U.S. home sales fell for the fourth consecutive month in May, as high demand continues to drive up real estate prices to unprecedented highs, according to new data from the National Association of Realtors.
The Association released its monthly report on Tuesday, reflecting the unusual dynamics of the real estate market this summer.
The report reveals that home sales fell by 3.4 percent last month to a two-year low of 5.41 million units sold, the lowest level since June 2020. The report saw new momentum in the real estate market in the Northeast, which reported a higher number of sales, but this was offset by lower home sales in the South, Midwest, and West regions.
At the same time, the report noted that median home prices surpassed $400,000 for the first time on record.
The picture which emerges of the real estate market is one of intense competition and a demand for homes that greatly outpaces the current supply, locking out many buyers who would otherwise pursue home ownership.
Notably, despite a season of consistently declining sales, home sales are still higher than pre-pandemic levels.
Kristina Morales, a veteran realtor who heads her eponymous real estate company, spoke to The Epoch Times about the factors which keep sales relatively high despite the prohibitively expensive market.
“Despite interest rates, home sales are still strong,” Morales said. “This is because there are so many buyers looking to purchase. While some buyers can no longer afford to buy with the higher interest rates, many buyers are still prepared to purchase at the higher interest rates. For example, instead of their being 30 offers on a property, maybe now there are 15 offers. Either way, both scenarios involve multiple offers which naturally drives up prices.”
The stratospheric ascent of real estate prices has fuelled speculation that the market could be heading towards an imminent crash, as in previous housing booms which saw exorbitant prices in highly competitive markets.
However, many analysts believe that this market is different, and that home prices are likely to remain high for quite some time before coming back to Earth.
“Rates are probably six percent, inventories are increasing, sales volume will be somewhat fine, but prices are going to soften,” said Redfin CEO Glenn Kelman in an interview last month.
Morales is in agreement that an outright real estate crash is unlikely in the near term, but there could be a shift towards the middle of the decade.
“I think home sales will stay strong through 2022. However, I expect that inventory will increase in 2023 as sellers try to capitalize on the strong real estate housing prices and buyer demand will decrease in 2023 if rates continue to stay high. Both of these variables will cause the housing market to neutralize as it eventually changes to a buyer’s markets in 2024 and beyond.”
Until then, many middle-class people pursuing homeownership may find themselves locked out of the market, as stiff competition from venture capitalists and private investors continues to prevent personal real estate purchasers from accessing the market.
The market for real estate remains red-hot, a testament to the unusual dynamics of the post-pandemic economy in which no one can be certain what the future holds.