High Rates and Prices Keep Existing Home Sales Stuck in Low Gear

The U.S. housing market showed some signs of life in May, but elevated mortgage rates and affordability challenges continued to put the brakes on existing home sales.

According to the National Association of Realtors (NAR), the seasonally adjusted annual rate of existing home sales hit 4.03 million in May. While that figure represents a slight 0.8% increase from April, it’s still 0.7% lower than May 2024 and marks the slowest May pace since the post-recession days of 2009.

Still, it was slightly better than expected. Analysts had forecast sales closer to 3.95 million units, so the modest uptick offers a bit of optimism for a market that’s been stubbornly sluggish.

Home Prices Set Yet Another Record

Even with sales lagging, prices keep climbing. NAR pegged the median sales price for an existing home at $422,800 in May up 1.3% year-over-year. It was the 23rd straight month of annual price growth, underscoring just how resilient home values have remained despite affordability pressures.

The Mortgage Rate Dilemma

Mortgage rates remain one of the biggest roadblocks for buyers. With the 30-year fixed rate hovering around 6.84% as of late June, affordability remains a major concern for prospective homeowners.

“Persistently high interest rates are still holding back both buyers and sellers,” said NAR Chief Economist Lawrence Yun. “If mortgage rates ease in the latter half of the year, we could see a rebound in home sales, driven by healthy job growth, better inventory, and improved consumer confidence.”

While some on the Federal Reserve Board have hinted at the possibility of interest rate cuts this summer, others have urged caution amid global uncertainty, including recent geopolitical events such as the U.S. bombing of Iranian nuclear sites. So far, oil prices have remained stable, but any spike could reignite inflation fears and further delay rate relief.

Inventory on the Rise, But It’s Not a Buyer’s Market Just Yet

One bright spot for buyers? There’s more to choose from.

Inventory climbed to 1.54 million units in May, up over 20% from a year earlier. That translates to a 4.6-month supply, up from 3.8 months in May 2024. Rising inventory is giving some buyers a bit more leverage at the negotiating table, but we’re not in full buyer’s market territory yet.

Still, the winds may be shifting. Danielle Hale, chief economist at Realtor.com, noted that the market is becoming more balanced.

“We’re entering the most buyer-friendly summer we’ve seen in nearly a decade,” she said. “While it’s not quite a buyers’ market, the tide is turning. Sellers are starting to realize they can’t price their homes as aggressively as they could a year or two ago.”

Sellers Losing the Upper Hand

With more homes sitting longer and buyers gaining some bargaining power, sellers may need to rethink their pricing strategies. Redfin Senior Economist Asad Khan pointed out that the days of sellers calling all the shots are fading.

“Buyers are getting a bit more confident, and some sellers are being forced to lower expectations. That dynamic could grow stronger as inventory continues to rise,” Khan said.

Outlook for the Rest of 2025

Fannie Mae recently revised its forecast for 2025 existing home sales down to 4.14 million, reflecting a more cautious outlook as mortgage rates remain elevated. Their latest projection also shows the average 30-year mortgage ending the year around 6.5%, up from the 6.1% forecast issued just a month prior.

Still, if rates ease even slightly in the coming months, a wave of pent-up demand could hit the market. Until then, many buyers and sellers may continue playing the waiting game. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.