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The greatest annual decline in US home prices since December 2011

According to data from the National Association of Realtors released on Thursday, home prices in the United States plummeted in May at their fastest annual rate in more than a decade.

In February, the median price of an existing home was $396,100, a decrease of 3.1% from the previous year and the greatest annual decline in price since December 2011.

Single-family homes, townhomes, condominiums, and cooperatives all contributed to the 0.2% increase in existing home sales seen between April and May. Sales declined 20.4% annually, and the yearly sales pace fell from 5.4 million units in May 2017 to 4.3 million units in May 2018.

The average mortgage rate this year has fluctuated between 6.09% and 6.79%; in April, when some of the homes that closed in May would have gone under contract, rates were rather stable.

According to NAR chief economist Lawrence Yun, mortgage rates have a significant impact on the trajectory of home sales. Multiple months of continuous home sales have resulted from the relatively stable interest rates.

However, prices vary widely depending on location. The South saw the biggest drop (2.7%) and the West the biggest drop (5.7%) from the previous year. The cost of living increased by 2.5% in the Northeast and by 1.1% in the Midwest compared to the previous year.

Almost a third of the properties that sold in May went over the asking price, according to Yun.

Availability issues are to blame, he said.

The National Association of Realtors reports that at the end of May, there were 1.08 million housing units available. This is down 6.1% from a year ago. Yun claims that there were roughly twice as many houses available before the outbreak.

The amount of unsold inventory represents a supply equal to three months at the current sales pace, which is an increase over the 2.9 months that were available in April and the 2.6 months that were available in May 2022.

New home sales have returned to pre-pandemic levels, according to Yun, while existing home sales are being held back by a lack of available homes for sale.

Affordability remains a problem because there aren’t enough homes for sale.

The lack of newly listed houses left buyers wanting more in the months leading up to May, according to Realtor.com’s chief economist, Danielle Hale.

A couple of facts also favored the May closing group.

In April, mortgage rates were stable, while the median transaction price continued to fall somewhat, providing buyers more breathing room in their budgets as they shopped.

She noted that while home sales have been running above the seasonally adjusted yearly rate of 4 million units reached in January, they are still significantly below statistics from a year earlier.

But despite the extremely low housing supply, problems with affordability persisted.

If home prices and interest rates keep rising, nearly 80% of homebuyers surveyed this spring believe it is at least somewhat possible that they will be priced out of the housing market.

Buyers will have a challenging market in 2023, according to Hale, because fewer homeowners are expected to become sellers in that year.

There are some bright spots in Realtor.com’s updated outlook for the remainder of the year, including the slow fall in mortgage rates starting around the middle of the year and the sustained weakness in home prices that will begin to moderate high housing expenses.

According to Hale, “home sales are expected to total approximately 4.2 million in 2023,” which would be the lowest yearly total since 2012.

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