Home sales finally rose in May, but don’t read too much into it…

“The bigger problem may be the ongoing lack of housing supply,” she said. “Existing homes make up approximately 90% of inventory, but existing homeowners are staying put. Average tenure length in the US is over 10.5 years. Fewer existing homeowners selling means fewer homes for sale and, ultimately, fewer sales.”

As mortgage rates rise, existing homeowners find themselves locked in “golden handcuffs,” Potapov added: “They have little financial incentive to sell their home only to buy a new one at a much higher mortgage rate. This is the rate lock-in effect.”

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In the coming months, Potapov added, potential home buyers will be sensitive to large swings in mortgage rates. Then, another glimmer of hope: “The general direction is toward housing market normalization.”

According to the NAHB, a new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the May reading of 696,000 units is the number of homes that would sell if this pace continued for the next 12 months.