Inventory is rising, but existing home sales remain in a major slump

The May existing-home sales report from the National Association of Realtors (NAR) shows sales at just 4.03 million, a 0.7% decrease year over year and up 0.8% compared to April. It was the slowest May for existing home sales since 2009 and the fourth consecutive month with a year-over-year decline in sales.

Unsold inventory also continues to rise substantially, with 1.54 million listings representing a 20.3% gain from last year. Months of supply reached 4.6.

One culprit for the muted spring homebuying market is mortgage rates, which popped back up to 7% after Trump announced a new global tariff regime in April. 

While many sellers have listed their homes after waiting months for rates to drop, buyers are still on the sideline with a cloudy near-term economic outlook.

“Lower interest rates will attract more buyers and sellers to the housing market,” said NAR Chief Economist Lawrence Yun in a statement. “Increasing participation in the housing market will increase the mobility of the workforce and drive economic growth. 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.”

The West is driving down the overall numbers, as existing-home sales there dropped 6.7% year over year. The South fell by 0.5% while the Northeast (4.2%) and the Midwest (1%) posted annual gains.

The median sale price jumped 1.3% to $422,800 a record high for the month of May.

Despite the additional inventory, buyers have plenty of macroeconomic reasons to proceed with caution. Trump paused the majority of the global tariffs, but that pause is scheduled to end July 9, and reports suggest that trade deals aren’t coming in fast enough to beat that deadline.

There is also a chance that the expanding war in the Middle East will drive up oil prices, which would put additional stress on household budgets. As of Monday, just before Iran struck a U.S. military base in Qatar, the 10-year Treasury was down to 4.30%.

Also, HousingWire lead analyst Logan Mohtashami notes that geopolitical events in the Middle East typically favor the bond market and the U.S. dollar, both of which tanked in the aftermath of Trump’s tariff announcement. However, Israel’s initial bombing of Iran did not move the bond market or the dollar.

The good news Monday on mortgage rates is that Federal Reserve Governor Christopher Waller said he doesn’t expect serious inflation related to tariffs and that a rate cut in July is not out of the question.