U.S. Existing Home Sales Rose 3.2% in May, Beating Expectations

Existing home sales in the U.S. jumped by 3.2% in May to an annual rate of 4.170 million units, exceeding the consensus forecast of 4.070 million. This marks the fastest pace of sales recorded this year and represents a 3.2% increase from a year ago. The rise in sales was driven by gains in the Midwest, South, and Northeast regions, while the West remained unchanged. Growth was primarily concentrated in single-family homes, as sales of condominiums and co-ops held steady.

Despite beating market expectations, overall activity in the housing market remains subdued. Sales have hovered around a 4.000 million annual pace for the past three years, a level comparable to the period following the Great Financial Crisis and well below the pre-COVID pace of around 5.250 million units. A significant factor contributing to this stagnation is affordability, which has deteriorated recently due to rising energy costs linked to geopolitical events, impacting short-term inflation.

The increase in inflation has led to a rapid escalation in 30-year mortgage rates, climbing 50 basis points since February to approximately 6.6%. This also suggests that further monetary easing from the Federal Reserve is unlikely in the near term, with futures markets now anticipating a potential quarter-point rate hike later in the year. However, some analysts believe the inflationary pressures from the recent conflict are temporary and foresee a decline in both inflation and interest rates once the situation stabilizes.

Buyers are also grappling with persistently low inventory. While existing home inventory is at its highest level since the pandemic, the months’ supply of homes—a measure of how long it would take to sell all available properties at the current sales pace—stood at 4.5 months in May. This is below the 5.0-month benchmark that the National Association of Realtors considers indicative of a balanced market. Many existing homeowners are reluctant to sell due to a