While home prices continue to moderate, May sales pace slowest in more than a decade
Despite stubbornly high mortgage rates and sluggish economic signals, existing home sales slightly increased in May. However, home sales overall were down from the same time last year, marking the slowest May sales pace in 16 years.
According to data from the National Association of Realtors (NAR), sales ticked up 0.8% from April to a seasonally adjusted annual rate of 4.03 million units, beating expectations from housing analysts who had predicted a decline.
Still, that number marks a 0.7% decrease from the same month last year and the slowest May sales pace since 2009. The report indicates that the housing market remains under pressure as affordability and economic uncertainty weigh heavily on buyers and sellers.
Lawrence Yun, chief economist for NAR, said the persistent challenges are directly tied to elevated borrowing costs.
“The relatively subdued sales are largely due to persistently high mortgage rates. Lower interest rates will attract more buyers and sellers to the housing market,” Yun said. “If mortgage rates decrease in the second half of this year, expect home sales across the country to increase due to strong income growth, healthy inventory, and a record-high number of jobs.”
Regional sales performance uneven
While national sales showed a minor increase, regional performance was uneven. The Northeast led with a 4.2% increase in sales compared to April and saw year-over-year growth as well. The Midwest also saw modest gains, up 2.1% monthly and 1% annually. The South followed with a 1.7% month-over-month bump, although sales there were still slightly lower than a year ago.
The West, however, experienced a sharp 5.4% decline in sales from April and a 6.7% annual drop. As the most expensive U.S. housing region, the West continues to feel the sting of affordability pressures. Median prices in the West climbed to $633,500, a 0.5% increase year over year, which may be pushing buyers out of the market.
Inventory levels saw meaningful gains, which may have supported May’s slight uptick in sales. Total housing inventory reached 1.54 million units at the end of May, a 6.2% increase from April and a 20.3% jump from a year ago. At the current pace, that equals a 4.6-month supply of homes, up from 3.8 months in May 2024.
Still, realtors say more inventory is needed to truly rebalance supply and demand. Properties lingered for an average of 27 days on the market compared to 24 days one year ago.
Despite increased supply, prices continue to trend higher. The median existing-home price rose to $422,800, an all-time high for May and a 1.3% increase from last year. That marks the 23rd straight month of year-over-year price gains.
Yun noted that demand remains robust relative to inventory, especially in mid-to-upper price ranges, with 28% of homes selling above list price. That’s up from 18% in April but slightly below the 30% seen in May 2024.
Mortgage rates remain a hurdle
First-time buyers made up just 30% of May transactions, down from 31% a year earlier and far from the 40% target many economists see as necessary for long-term market health. All-cash transactions accounted for 27% of deals, the same as April but slightly lower than a year ago. Distressed sales made up 3% of the market, ticking up from 2% in both April and last May.
According to Freddie Mac, the average 30-year fixed mortgage rate hovered near 7% in May. Rates peaked above that level in April before pulling back slightly in June to 6.81%.
The Federal Reserve has kept its benchmark interest rate steady in the 4.25%-4.50% range since December, and recent statements from Fed Chair Jerome Powell suggest caution due to ongoing inflationary pressures linked to tariffs.
Lawrence Yun, Chief Economist at the National Association of Realtors, believes a rate decline could trigger a surge in home demand. Even small changes in mortgage rates impact sales, and a 0.5% drop could significantly boost buyer activity. https://t.co/GY1GUmGZzb
— Mortgage Professional America Magazine (@MPAMagazineUS) June 20, 2025
Meanwhile, homebuilder sentiment has taken a hit. A recent National Association of Home Builders survey showed declining confidence, with more builders offering price cuts and predicting lower single-family home starts for the year.
While the market remains soft, the combination of increased inventory and steady demand suggests the potential for improvement if mortgage rates ease.
“Increasing participation in the housing market will increase the mobility of the workforce and drive economic growth,” Yun added.
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