Existing-Home Sales Reach Five-Month High as Affordability Improves

Existing-home sales in May climbed to a seasonally adjusted annual rate of 4.17 million, marking the strongest performance since December. This 3.2% monthly increase reflects improving affordability and steady income gains that are helping to sustain demand despite tight inventory levels. For the residential mortgage sector, this uptick in transaction volume signals a potential rise in origination activity as more buyers enter the market.

According to the National Association of Realtors (NAR), existing-home sales rose 3.2% in May from the previous month, reaching their highest level since December. On an annual basis, sales were also up 3.2%, driven by what NAR Chief Economist Lawrence Yun describes as improving affordability and steady household income gains. Yun noted that mortgage rates currently remain below last year’s levels and are generally consistent with long-term historical averages, providing a supportive environment for Americans on the move.

Despite the increase in sales activity, the market continues to face supply constraints, though inventory levels are showing signs of improvement. Total housing inventory reached 1.55 million units in May, a 3.3% increase from April and a 0.6% rise from the previous year, resulting in a 4.5-month supply of homes. This limited supply helped push the median existing-home price to a record high of $429,300, representing the 35th consecutive month of year-over-year price increases with a 1.3% gain.

Affordability metrics showed positive momentum as the Housing Affordability Index rose to 105.6 from 97.5 a year ago. Yun highlighted that income gains are currently outpacing home-price growth in most regions, which has kept buyers engaged even as interest rates have fluctuated recently. Furthermore, the market remains on a healthy financial footing, with distressed sales—including foreclosures and underwater properties—accounting for only 1% of total transactions.

The increase in sales activity is expected to have a positive ripple effect across the broader economy and the residential mortgage industry specifically. Yun emphasized that stronger sales volume directly supports mortgage originations, alongside related services such as moving, furniture sales, and home maintenance. This trend underscores a resilient housing market where buyer demand is effectively navigating the challenges of record-high prices and relatively low inventory.