Existing Home Sales Rise 3.2% in May as Mortgage Rates Stabilize

Existing home sales in the U.S. increased 3.2% in May, reaching a seasonally adjusted annual rate of 4.17 million units, according to the National Association of Realtors (NAR). This marks the largest monthly gain since December and exceeded economists’ expectations of a less than 1% rise, as mortgage rates edged lower following a sharp climb earlier in the year.

“Improving affordability is helping drive this momentum,” said Lawrence Yun, chief economist at NAR, in a statement. “Even with mortgage rates ticking up compared to earlier in the year, they remain lower than a year ago and are essentially at the long-term historical average.”

Why Did Sales Rebound?

The surge in sales followed a slight decline in mortgage rates during April, which eased pressure on buyers after a volatile start to 2024. The 30-year fixed mortgage rate averaged 6.5% in May, down from a peak of 7.2% in March, according to Freddie Mac. This reduction, coupled with steady income growth, helped restore some buyer confidence.

Sales were also up 3.2% year-over-year, the strongest annual growth since December 2023. However, the market remains uneven, with higher-end properties outperforming lower-priced homes. Sales of homes priced above $1 million rose 11% compared to May 2024, while units between $100,000 and $250,000 fell 5%.

Inventory and Pricing Trends

Home inventory increased 3.3% in May to 1.55 million units, but supply remains tight. At the current sales pace, this equates to a 4.5-month supply, below the balanced 6-month threshold. The median price for an existing home hit $429,300 in May, a 1.3% annual increase and a record high for the month.

“With a still tight supply, prices continue to rise,” Yun said. “Only 1% of all home sales involved a foreclosure or an underwater situation, showing homeowners are on solid financial footing.”

Who’s Buying? First-Time Buyers Return

First-time buyers accounted for 35% of sales in May, up from 33% in April and 30% in May 2024. This shift reflects renewed interest from buyers who had paused during the rate hikes. Meanwhile, cash sales made up 25% of transactions, a slight decline from the previous year.

Homes remained on the market for an average of 29 days in May, down from 32 in April but up from 27 in May 2025, according to NAR. The fluctuation highlights the ongoing volatility in buyer demand.

What’s Next for the Market?

Analysts suggest the housing market’s recovery hinges on whether mortgage rates stabilize. A recent Federal Reserve decision to hold interest rates steady in June may provide temporary relief, but persistent inflation and geopolitical tensions—such as the ongoing conflict in the Middle East—could reignite volatility.

“The path forward depends on how quickly affordability improves,” said Yun. “If rates remain near current levels, we could see continued modest growth, but a significant rise would likely dampen activity.”

Key Takeaways

• Existing home sales rose 3.2% in May to 4.17 million units, exceeding expectations.
• Mortgage rates declined slightly in April, easing buyer pressure.
• Inventory remains low, with a 4.5-month supply, driving price increases.
• First-time buyers returned, making up 35% of sales in May.

For more insights on the housing market, visit the National Association of Realtors or follow CNBC for updates.