Housing prices rose more than 20 percent in the 12 months leading into May, according to data released Tuesday by the National Association of Realtors (NAR), setting a new annual record.
The median sale price for existing homes in May rose 23.6 percent from a year ago, marking a new peak as the COVID-19 pandemic drove a massive increase in housing prices and sales.
While existing home sales dropped 0.9 percent between April and May, sales are up 44.6 percent from May 2020. The inventory of available homes for sale also rose 7 percent last month, but is down a staggering 20.6 percent from May 2020.
"Home sales fell moderately in May and are now approaching pre-pandemic activity," said Lawrence Yun, NAR chief economist, in a Tuesday statement.
"Lack of inventory continues to be the overwhelming factor holding back home sales, but falling affordability is simply squeezing some first-time buyers out of the market.”
Housing sales and home prices had risen steadily before the coronavirus pandemic, but COVID-19 poured accelerant on the historically hot housing market.
Ultralow interest rates and the persistence of teleworking has driven millions of households to move from apartments or smaller homes into more spacious houses. At the same time, pandemic-related restrictions derailed the housing construction sector until earlier this year.
While the hot housing market has been a boon for homeowners and those with enough money to become them, the explosion of prices has left many more struggling to enter the market.
Even so, Yun said a likely rebound on housing supply should relieve some of the pressure on sale prices.
“Supply is expected to improve, which will give buyers more options and help tamp down record-high asking prices for existing homes,” he explained.
President Biden has proposed spending $213 billion to increase the supply of affordable homes for sale and apartments for rent through his sprawling infrastructure proposal. While Republican lawmakers oppose most of those measures, several GOP lawmakers have expressed interest in bills meant to loosen zoning laws and other regulations that could impede home construction.