Sales of previously owned homes showed a significant rebound in May, rising 3.2% from April and matching the same percentage increase year-over-year, according to the National Association of Realtors. This uptick to an annualized rate of 4.17 million units exceeded economists' expectations of less than a 1% gain.
The increase is likely linked to a slight pullback in mortgage rates in April, following a sharp rise in early March due to geopolitical tensions. Lawrence Yun, the chief economist for the Realtors, noted that improving affordability is driving this momentum, as mortgage rates, while higher than earlier in the year, remain lower than last year and close to historical averages.
Additionally, income growth is outpacing home price increases in many areas. Inventory levels also rose by 3.3% month-over-month to 1.55 million units, although this is only a slight increase from the previous year. At the current sales pace, this represents a 4.5-month supply of homes, which is still below the balanced market threshold of 6 months.
The median home price reached a record high of $429,300, reflecting a 1.3% increase from the previous year. Notably, only 1% of sales involved foreclosures or underwater situations, indicating that homeowners are generally in a strong financial position.
The luxury market is performing particularly well, with sales of homes priced above $1 million up 11% year-over-year, while lower-priced homes saw a decline in sales. First-time buyers accounted for 35% of sales, an increase from 33% in April and 30% a year ago. Homes are selling faster, with an average market time of 29 days, although this is slightly longer than the 27 days recorded in May 2025.
Cash sales made up about a quarter of all transactions, a slight decrease from the previous year