The median price for an existing home sold in May rose to a record high of $407,600 in May, the National Association of Realtors said Tuesday.

This is the first time the median home price has exceeded $400,000. Compared with a year ago, the median selling price is up 14.8 percent.

The median existing single-family home price was $414,200 in May, up 14.6 percent from May 2021.

Prices have continued to climb as the nation is gripped by inflation and a shortage of homes for sale. Rising mortgage rates, which have climbed sharply this year as the Fed hikes interest rates to fight inflation, have dealt a severe blow to housing affordability.

First-time buyers were responsible for 27 percent of sales in May, down from 28 percent in April and down from 31 percent in May 2021.
Sales of existing homes fell 3.4 percent to a seasonally adjusted annual rate of 5.41 million in May, according to the N.A.R. Compared with a year ago, sales are down 8.6 percent.

“Declining home purchases means more people are renting, and the resulting rent price escalation may spur more institutional investors to buy single-family homes and turn them into rental properties – placing additional financial strain on prospective first-time homebuyers,” said NAR President Leslie Rouda Smith, a Realtor® from Plano, Texas, and a broker associate at Dave Perry-Miller Real Estate in Dallas. “To counter this trend, policymakers should consider incentivizing an inventory release to the market by temporarily lowering capital gains taxes for mom-and-pop investors to sell to first-time buyers.”

This is the fourth straight monthly decline in home sales. It’s likely sales will fall even further based on pending home sales data. Existing home sales are counted at closing, while pending sales are signings that show in the existing home sales two to three months later.

The average rate on a 30-year fixed mortgage in the United States was 3.11 percent at the start of the year. In March and April, when many of the closing counted in the May numbers would have been signed, rates climbed from 4.17 to around five percent. Now they are topping six percent.

“Further sales declines should be expected in the upcoming months given housing affordability challenges from the sharp rise in mortgage rates this year,” said NAR Chief Economist Lawrence Yun. “Nonetheless, homes priced appropriately are selling quickly and inventory levels still need to rise substantially – almost doubling – to cool home price appreciation and provide more options for home buyers.”

The number of homes on the market rose 12.6 percent to 1.16 million units in May. Despite the gain, this is 4.1 percent below last year’s level.

Homes remained on the market only for 16 days on average, the fastest on record and down one day from April.

“Home sales have essentially returned to the levels seen in 2019 – prior to the pandemic – after two years of gangbuster performance,” Yun said. “Also, the market movements of single-family and condominium sales are nearly equal, possibly implying that the preference towards suburban living over city life that had been present over the past two years is fading with a return to pre-pandemic conditions.”