The U.S. housing market delivered an unexpected burst of momentum in May, with existing home sales rising to their fastest pace of the year despite mortgage rates remaining high and record home prices.
Sales of previously owned homes climbed 3.2% from April to a seasonally adjusted annual rate of 4.17 million units, according to data released by the National Association of Realtors. The figure topped economists' expectations and marked the strongest sales pace since December. Sales were also up 3.2% compared to the same month last year.
The median existing-home price reaching $429,300 in May, the highest price ever recorded for the month and the 35th consecutive month of annual price growth, according to the report.
Ordinarily, higher prices and elevated borrowing costs would be expected to slow demand, but, after almost four years of high borrowing costs, buyers appeared willing to move forward, encouraged by slightly improved inventory levels and mortgage rates that remain below where they were a year ago.
Lawrence Yun, chief economist for the National Association of Realtors, said affordability has improved in some markets because incomes have been rising faster than home prices. He also noted that mortgage rates, while still elevated, are lower than they were at this time in 2025.
The housing market has struggled since 2022, when mortgage rates surged from pandemic-era lows. Existing-home sales last year fell to their weakest level in roughly three decades, and many analysts entered 2026 expecting another sluggish year.
One of the more surprising developments in May was the return of first-time buyers, which accounted for 35% of all purchases, the highest share since June 2020, though still below the historical norm of about 40%, according to NAR.
Inventories also continued to improve. At the end of May, there were 1.55 million homes on the market, up 3.3% from April. While that remains below pre-pandemic levels, it gives buyers more choices than they had during the height of the housing shortage.
Some economists believe the stock market's strong performance has also helped fuel demand, particularly among higher-income buyers. Sales of homes priced above $1 million have been especially strong, suggesting that wealthier Americans are using investment gains to offset higher borrowing costs.
Still, analysts question whether the momentum in the housing market can continue through the summer. Mortgage rates have hovered around 6.5%, and uncertainty surrounding inflation, energy prices, and global conflicts continues to weigh on consumer confidence. Analysts say a more sustained recovery will likely require mortgage rates to move closer to 6% or lower.
