U.S. housing market shows minimal growth in May amid high mortgage rates
TOI World Desk | TIMESOFINDIA.COM | Jun 24, 2025, 00:42 IST
( Image credit : AP, TOIGLOBAL )
Existing home sales saw a marginal increase of 0.8% in May, yet remain subdued due to elevated mortgage rates and affordability challenges. Inventory is improving, but prices continue to rise, with the median reaching a record $422,800. The market favors high-income buyers, as sales in the luxury segment have cooled, and first-time buyers remain cautious amid these financial conditions.
The U.S. housing market showed only faint signs of momentum in May, as sales of previously owned homes crept up just 0.8% from April, according to new data from the National Association of Realtors (NAR). Despite the slight increase, overall market activity remains muted amid elevated mortgage rates and affordability challenges.
May’s annualized sales pace reached 4.03 million units, narrowly defying analysts’ predictions of a 1% decline. However, sales still came in 0.7% below levels seen a year earlier. The latest figures reflect closings from contracts likely signed in March and April—months when mortgage rates were climbing above 7%, putting pressure on buyers.
“The relatively subdued sales are largely due to persistently high mortgage rates,” said Lawrence Yun, NAR’s chief economist. “Lower interest rates will attract more buyers and sellers to the housing market. 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.”
Regionally, the Northeast led the nation with a 4.2% monthly increase in sales. Gains were also recorded in the Midwest and South. However, the West—a region with some of the nation’s most expensive real estate—saw sales drop by 5.4%.
While sales growth remained limited, housing supply showed notable improvement. Inventory rose to 1.54 million homes, a more than 20% jump compared to May of last year. At the current pace of sales, that equates to a 4.6-month supply—still short of the six-month benchmark considered a balanced market, but a meaningful improvement for home shoppers.
However, even with rising inventory, prices remain under pressure due to continued demand. The median price of an existing home hit $422,800 in May, a 1.3% increase year over year and the highest median ever recorded for the month. Roughly 28% of homes sold above asking price, a rise from April’s 18%, though slightly lower than the 30% seen in May 2024.
The market continues to favor high-income buyers. Sales were strongest in the $750,000 to $1 million range, with a modest 1% increase. Homes priced over $1 million, however, saw a decline in sales compared to a year ago. This marks a shift from the previous 20 months when the luxury market consistently outperformed other price segments.
“The upper end market is showing no difference compared to other price points,” Yun noted. “For the past 20 months we have seen the upper end outperforming, but that is no longer the case.” He pointed to April’s stock market volatility, triggered by newly imposed tariffs, as a possible factor affecting higher-end buyers.
Other trends suggest buyers remain cautious. Homes took an average of 27 days to sell, up from 24 days a year ago. First-time buyers made up just 30% of all transactions, down slightly from 31% last year. Meanwhile, all-cash purchases accounted for 27% of deals, up year over year, signaling that financially secure buyers are still active while others sit on the sidelines.
As the housing market navigates high borrowing costs, evolving supply dynamics, and shifting demand patterns, buyers and sellers alike are watching mortgage rates closely. A meaningful drop could reignite broader market activity—but until then, the housing landscape remains a careful balancing act between affordability and availability
May’s annualized sales pace reached 4.03 million units, narrowly defying analysts’ predictions of a 1% decline. However, sales still came in 0.7% below levels seen a year earlier. The latest figures reflect closings from contracts likely signed in March and April—months when mortgage rates were climbing above 7%, putting pressure on buyers.
“The relatively subdued sales are largely due to persistently high mortgage rates,” said Lawrence Yun, NAR’s chief economist. “Lower interest rates will attract more buyers and sellers to the housing market. 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.”
Regionally, the Northeast led the nation with a 4.2% monthly increase in sales. Gains were also recorded in the Midwest and South. However, the West—a region with some of the nation’s most expensive real estate—saw sales drop by 5.4%.
While sales growth remained limited, housing supply showed notable improvement. Inventory rose to 1.54 million homes, a more than 20% jump compared to May of last year. At the current pace of sales, that equates to a 4.6-month supply—still short of the six-month benchmark considered a balanced market, but a meaningful improvement for home shoppers.
However, even with rising inventory, prices remain under pressure due to continued demand. The median price of an existing home hit $422,800 in May, a 1.3% increase year over year and the highest median ever recorded for the month. Roughly 28% of homes sold above asking price, a rise from April’s 18%, though slightly lower than the 30% seen in May 2024.
The market continues to favor high-income buyers. Sales were strongest in the $750,000 to $1 million range, with a modest 1% increase. Homes priced over $1 million, however, saw a decline in sales compared to a year ago. This marks a shift from the previous 20 months when the luxury market consistently outperformed other price segments.
“The upper end market is showing no difference compared to other price points,” Yun noted. “For the past 20 months we have seen the upper end outperforming, but that is no longer the case.” He pointed to April’s stock market volatility, triggered by newly imposed tariffs, as a possible factor affecting higher-end buyers.
Other trends suggest buyers remain cautious. Homes took an average of 27 days to sell, up from 24 days a year ago. First-time buyers made up just 30% of all transactions, down slightly from 31% last year. Meanwhile, all-cash purchases accounted for 27% of deals, up year over year, signaling that financially secure buyers are still active while others sit on the sidelines.
As the housing market navigates high borrowing costs, evolving supply dynamics, and shifting demand patterns, buyers and sellers alike are watching mortgage rates closely. A meaningful drop could reignite broader market activity—but until then, the housing landscape remains a careful balancing act between affordability and availability