Sales of existing homes in May dropped 3.4% to a seasonally adjusted annualized rate of 5.41 million units, according to the National Association of Realtors.

Sales were 8.6% lower than in May 2021. April’s sales were revised slightly lower as well.

This is the weakest reading since June 2020, which was during the early months of the Covid pandemic. Adjusting for that, it is the lowest since January 2020.

This reading is based on closings during the month, therefore representing contracts likely signed in March and April. During that time the average rate on the 30-year fixed mortgage rose from right around 4% to 5.5%. It is currently right around 6%, according to Mortgage News Daily. Rising rates, along with rapid home price appreciation and continued low supply, have given affordability a triple punch.

“I do anticipate a further decline in home sales,” said Lawrence Yun, chief economist at the National Association of Realtors. “The impact of higher mortgage rates are not yet fully reflected in the data.”

There were 1.16 million homes for sale at the end of May, an increase of 12.6% month to month but still down 4.1% from May 2021. At the current sales pace, that represents a 2.6-month supply.

Low supply continued to push home prices higher. The median price of a house sold in May was $407,600, an increase of 14.8% from May 2021. That is the highest price on record since the Realtors began tracking it in the late 1980s.

Supply is leanest on the lower end of the market, which is likely why activity there continues to be weaker than on the higher end. Sales of homes priced between $100,000 and $250,000 dropped 27% from a year ago. Sales of homes priced between $750,000 and $1 million were up 26%. Sales of homes priced above $1 million surged 22% year over year.

Homes are selling quickly, however. Houses stayed on the market an average of just 16 days, the lowest on the Realtors’ record. All-cash sales were still elevated at 25% of all sales. Investors made up 16% of all transactions, down slightly from April and from a year ago.

First-time buyers made up just 27% of all transactions, down from 31% a year ago. Affordability is clearly hitting them hardest, as rents are rising as well.

“Higher short-term rates from the Fed are helping to drive a much-needed housing reset – a real estate refresh,” wrote Danielle Hale, chief economist at Realtor.com. “While the rebalancing is needed, it’s upping the challenge of navigating the housing market for both sellers and buyers as expectations and conditions are adjusting rapidly.”

Realtor.com recently updated its forecast for 2022 home sales, now projecting fewer this year than last year.