Typically a hot month for home sales, May 2022 saw closed transactions dip 8.5% lower than the same time last year.
May is usually an active month for home sales – but May 2022 saw an 8.5% decrease in closings year-over-year. RE/MAX, LLC President and CEO Nick Bailey doesn’t consider this change all that surprising, however, given the recent rise in mortgage rates.
Elevated rates have seemingly led to an abnormal cooldown for this time of year, but given the context of the blistering hot housing market of the past two years, as well as the fact that the U.S. is still short by about 4 million homes, Bailey is confident demand still remains sky high.
Affordability remains a challenge, and likely will for the near future, but the latest data finally show some power being restored to buyers.
“A decline in home sales isn’t entirely unexpected given the higher mortgage rate environment, but the slight increase in inventory is welcome news for buyers who are now starting to see a few more listings come onto the market during their home search,” said Bailey. “Options in multi and single-family housing are there that weren’t available just a few short months ago. Affordability remains a concern, but homebuyers are regaining some control which has been long overdue.”
One particular benefit for buyers seen in the latest RE/MAX National Housing Report? An increase in housing supply.
Inventory grew for the second consecutive month, making May the first month of 2022 to see an increase in inventory levels compared to one year ago. The month ended with 16.3% more homes for sale than in April 2022, and 2.2% more than May 2021. Buyers are starting to have more options to choose from, particularly in the West.
Tim Yee, President and Broker of RE/MAX Gold in the Bay Area, expects inventory to continue to improve over time and notes the cooldown isn’t the “dramatic change [that] some have predicted, but rather a cooling down of what was a sizzling market.”
Added Yee, “As we move into the typically slower summer season and with the rise in interest rates as the Fed tries to cool down inflation, I expect inventory to rise slightly and pricing to stabilize, leveling the market for buyers and bringing a ‘new normal’ for sellers.”
Here’s the need-to-know data from the U.S. metro areas surveyed for the May 2022 RE/MAX National Housing Report:
May Home Sales Are Down
Closings in May 2022 were 8.5% lower than May 2021. They did, however, climb 5.8% over April 2022. That month-over-month increase was approximately half of the average gain in May during the pre-pandemic years of 2015-2019. The markets with the biggest decrease in year-over-year sales percentage were Los Angeles, CA at -24.4%, Miami, FL at -22.4%, and San Diego, CA at -20.4%. Leading the year-over-year sales percentage increase were Burlington, VT at +16.1%, Manchester, NH at +6.4%, and Honolulu, HI at +4.9%.
Home Prices Keep Climbing
So far unaffected by rising mortgage rates, May’s Median Sales Price of $430,000 grew 1.2% over April’s $425,000 and was 13.2% higher than the $380,000 recorded in May 2021. No metro areas saw a year-over-year decrease in Median Sales Price. Thirty-nine metro areas increased year-over-year by double-digit percentages, led by Kansas City, MO at +32.9%, Fayetteville, AR at +28.8%, and Tampa, FL at +28.4%.
Homes Are (Still) Selling for More than the List Price
In May 2022, the average Close-to-List Price Ratio of all 51 metro areas in the report was 103.3%, down 0.2% compared to April 2022, and up 1.6% from May 2021. This means that homes sold for 3% more than the asking price. That compared to nearly 104% last month and 102% in May 2021.The metro areas with the lowest Close-to-List Price Ratio were Miami, FL at 98.1%, New Orleans, LA at 99.2%, and Coeur d’Alene, ID at 99.9%. The highest Close-to-List Price Ratios were in San Francisco, CA at 111.3%, Burlington, VT at 106.7%, and Richmond, VA at 106.5%.
The Number of Homes for Sale is Up (Yes, Up!)
The number of homes for sale in May 2022 was up 16.3% from April 2022 and up 2.2% from May 2021. Based on the rate of home sales in May 2022, the Months’ Supply of Inventory increased to 0.9 compared to 0.8 in April 2022 and decreased compared to 1.0 in May 2021. In May 2022, the markets with the lowest Months’ Supply of Inventory were a three-way tie between Albuquerque, NM Manchester, NH, and Milwaukee, WI at 0.4.