(Bloomberg) -- Sales of existing homes in the US fell for a third straight month in May while prices set another record, underscoring persistent affordability challenges that hobbled the important spring selling season.

Contract closings decreased 0.7% from a month earlier to a 4.11 million annualized rate, driven entirely by a decline in the South, according to National Association of Realtors data released Friday. The figure was in line with the median estimate in a Bloomberg survey of economists. 

Meantime, the inventory of existing homes for sale has crept up recently, partly because people who’ve been waiting for rates to drop before listing their homes have decided they can’t wait any longer.

The supply of homes on the market increased 18.5% from the same month last year to 1.28 million, but it’s still well below the level seen before the pandemic when mortgage rates were much lower.

That explains why prices remain elevated — the median sales price increased 5.8% from a year ago to a record $419,300, reflecting more sales of high-priced properties as well as multiple offers, NAR’s data show.

“Home prices reaching new highs are creating a wider divide between those owning properties and those who wish to be first-time buyers,” NAR Chief Economist Lawrence Yun said in a statement. “Eventually, more inventory will help boost home sales and tame home price gains in the upcoming months.”

Delayed Recovery

Mortgage rates have come down somewhat recently, but the Federal Reserve likely won’t lower interest rates until later this year. Yun said that may be delaying the recovery in home sales, which have been stuck around a 4 million annualized rate for the past year.

At the current pace, selling all homes on the market would take 3.7 months, the highest in four years. Even so, agents see anything below five months as indicative of a tight market.

About 67% of the homes sold were on the market for less than a month in May, roughly flat from the prior month, while 30% sold above the list price. Properties remained on the market for 24 days on average in May, compared with 26 days in April, NAR’s report said.

Existing-home sales account for the majority of the US total and are calculated when a contract closes. The government releases May new-home sales figures on June 26.

--With assistance from Chris Middleton.

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