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.