Home Sales Drop, But Prices Keep Climbing

Existing home sales continued to decline in May, marking the third straight month of falling transactions. Sales dropped 0.7 percent from April and remain nearly three percent lower than this time last year. Despite the slowdown in activity, home prices reached a new all-time high, further widening the gap between current homeowners and those trying to enter the market.

The inventory of homes for sale increased by 18.5 percent compared to last year, providing more options for buyers. However, this has not been enough to cool prices, as demand still outpaces supply in many regions. Mortgage rates remain stubbornly above seven percent, making affordability a growing challenge. First-time buyers, in particular, are feeling the squeeze, accounting for just 31 percent of home purchases, a slight drop from the previous month.

While most homes are still selling quickly—about two-thirds were on the market for less than a month—buyer confidence is at an all-time low. Many potential buyers are holding off, waiting to see if prices or mortgage rates improve. Experts suggest that if inventory continues to rise, it could help stabilize prices in the coming months, but the market remains tough for new buyers.

With sales slowing but prices still climbing, the housing market remains in a tricky spot. If mortgage rates stay high and affordability worsens, home sales may continue to struggle. However, any signs of relief in borrowing costs could reignite buyer demand and shift the market dynamics once again.