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By Alex Veiga

The Associated Press

LOS ANGELES 鈥� Sales of previously occupied U.S. homes fell in May for the third straight month as rising mortgage rates and record-high prices discouraged many prospective homebuyers during what鈥檚 traditionally the housing market鈥檚 busiest period of the year.

Existing home sales fell 0.7 percent last month from April to a seasonally adjusted annual rate of 4.11 million, according to the National Association of Realtors.

Sales also fell 2.8 percent compared with May 2023. The latest sales still came in slightly higher than the 4.07 million pace economists were expecting, according to FactSet.

鈥淚 thought that we would actually see a recovery this spring, (but) we are not seeing it,鈥� said Lawrence Yun, the NAR鈥檚 chief economist.

Despite the pullback in sales, home prices climbed year over year for the 11th month in a row. The national median sales price rose 5.8 percent from a year earlier to $419,300, an all-time high on records going back to 1999. It鈥檚 also up 51 percent from five years ago.

Home prices rose even as sales slowed and the supply of properties on the market hit its highest level in four years.

鈥淚t鈥檚 somewhat of a strange phenomena,鈥� Yun said. 鈥淲e had low home sales activity, prices are hitting record highs and homes look like they鈥檙e still getting multiple offers.鈥�

The U.S. housing market has been mired in a slump going back to 2022, when mortgage rates began to climb from pandemic-era lows. Existing home sales sank to a nearly 30-year low last year as the average rate for a 30-year mortgage surged to a 23-year high of 7.79 percent, according to mortgage buyer Freddie Mac.

The average rate for a 30-year mortgage聽has mostly hovered around 7 percent this year as stronger-than-expected reports on the economy and inflation have forced the Federal Reserve to keep its short-term rate at the highest level in more than 20 years.

Federal Reserve officials said earlier this month聽that inflation has fallen further toward their target level of 2 percent in recent months and signaled that they expect to cut their benchmark interest rate once this year. The central bank had previously projected as many as three cuts in 2024, which raised expectations in the housing market for mortgage rates to have eased further by now.

鈥淢aybe the Federal Reserve interest rate cut policy, which was projected to happen, but did not happen 鈥� it鈥檚 getting delayed and delayed and delayed 鈥�- maybe that鈥檚 causing the home sales recovery to be delayed,鈥� Yun said.

The elevated mortgage rates are keeping many homeowners who bought or refinanced more than two years ago from selling now because they don鈥檛 want to give up their fixed-rate mortgages below 3 or 4 percent 鈥� a trend real estate experts refer to as the 鈥渓ock-in鈥� effect.

As of the end of 2023, more than 50 percent of homes with a mortgage had a rate that was 4 percent or lower, and 87 percent had a rate at 6 percent or lower, according to Realtor.com.

Another factor that鈥檚 constrained the housing market is a tight supply of homes for sale, though that鈥檚 been easing this year, partly because homes are taking longer to sell.

All told, there were about 1.3 million unsold homes at the end of last month 鈥� increases of 6.7 percent from April and 18.5 percent from May 2023, NAR said.

That translates to a 3.7-month supply at the current sales pace. In a more balanced market between buyers and sellers the supply is four to five months.

鈥淟et鈥檚 wait to see if this leads to more home sales,鈥� Yun said. 鈥淪o far, that鈥檚 not the case, but at least the inventory is beginning to loosen up.鈥�

Despite the increase in available homes for sale this spring, sellers generally still have the edge on buyers.

Homebuyers last month snapped up homes typically within just 24 days after the properties hit the market. And 30 percent of those properties sold for more than their original list prices, which typically means sellers received offers from multiple parties.

First-time homebuyers without any home equity to put toward their down payment continue to have a tough time entering the market. They accounted for 31 percent of all homes sold last month, which is down from 33 percent in April, but up from 28 percent in May 2023. They鈥檝e accounted for 40 percent of sales historically.

Homebuyers who can afford to sidestep mortgage rates and pay all cash accounted for 28 percent of sales last month, up from 25 percent in May 2023. And about 16 percent of homes sold in May were bought by individual investors or homeowners looking to buy a second home, up from 15 percent a year earlier, the NAR said.