Sales of previously owned U.S. homes barely rose in May as high mortgage rates continued to crimp demand and discourage owners from listing their properties.

Contract closings edged up 0.2% to a 4.3 million annualized pace, according to data released Thursday by the National Association of Realtors. Compared with a year earlier, sales were down more than 18% on an unadjusted basis.

The median selling price declined 3.1% from a year earlier, the most since 2011, to $396,100. That’s still historically elevated for the month and reflective of limited supply.

The number of homes for sale fell 6.1% from a year earlier to 1.08 million units. That’s the lowest inventory level for any May in data back to 1999.

The constrained inventory levels, pared with high mortgage rates, continue to impede the resale housing market. That’s discouraging homeowners from moving and taking on higher borrowing costs, therefore pushing buyers toward new properties instead.

As a result, home builder sentiment and new construction are on the rise. A report earlier this week showed housing starts surged in May by the most since 2016, putting residential investment on track to add to the gross domestic product for the first time in two years.

“Relatively steady rates have led to several consecutive months of consistent home sales,” Lawrence Yun, NAR’s chief economist, said in a statement. “However, existing-home sales activity is down sizably due to the current supply being roughly half the level of 2019.”

Mortgage rates are still hovering near the highest level in decades, and Federal Reserve policymakers said last week they expect another two interest-rate hikes this year. Chair Jerome Powell reiterated that projection in testimony before lawmakers Wednesday while adding housing inflation is set to come down “significantly” into next year.

At the current sales pace, it would take three months to sell all the properties on the market. Realtors see anything below five months of supply as indicative of a tight market.

Thursday’s report showed 74% of homes sold were on the market for less than a month. Properties remained on the market for 18 days on average in May, down from 22 days in April.

Sales of single-family homes edged lower to an annualized 3.85 million pace. Existing condominium and co-op sales rose.

Existing-home sales typically account for the vast majority of U.S. housing and are calculated when a contract closes. Data on new-home sales, which make up the remainder, are based on contract signings and are due next week.

 

Bloomberg’s Chris Middleton and Hannah Pedone contributed to this report.

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