U.S. home sales jumped 2.5% in May, as lower mortgage rates appeared to help buyers overcome affordability challenges.
The National Association of Realtors said Friday that existing homes sold at a seasonally adjusted annual rate of 5.34 million last month, up from 5.21 million in April.
The recent gains likely came from reduced borrowing costs that made it easier to finance a home. Rates for the 30-year mortgage are averaging 3.84% this week, down sharply from 4.57% a year ago, according to the mortgage buying company Freddie Mac.
“The market no longer faces the climbing mortgage rates or poor stock market performance that helped set the stage for last year’s declines — and existing home sales are bouncing back slowly,” said Matthew Speakman, an economist at the real estate company Zillow.
Still, the real estate market has yet to shake off last year’s slump. Home sales fell 1.1% from a year ago.
The faster pace of sales also boosted prices. The median sales price in May was $277,700, a 4.8% increase from last year.
More homes have come onto the market in the past year, but it’s been insufficient to inject a meaningful amount of inventory that would give would-be buyers more choices.
Sales listings have increased 2.7% from a year ago to 1.92 million homes. But the market contains a mere 4.3 months’ supply of properties, well below the six months that were once deemed to be a sign of a healthy market.
Over the past year, homes prices between $250,000 and $750,000 experienced the strongest sales growth.
But sales of homes at cheaper price points have been flat or falling, a sign that the lack of entry-level homes has been an obstacle for would-be buyers.