Existing Homes in May: Stronger Sales, Moderating Price Gains

There were some healthy signals from the existing home market in May, as sales rose strongly and price growth moderated.  The National Association of Realtors® (NAR) said all four regions of the country experienced a month-over-month improvement in sales but prices fell slightly in the Northeast.  

Sales of existing homes, condos, and coops rose 4.9 percent to a seasonally adjusted annual rate of 4.89 million units in May, the largest month-over-month gain since August 2011.  Despite the strong showing the May rate was still 5.0 percent lower than the 5.15 million pace one year earlier.  NAR revised its original figures on April sales upward from 4.65 million to 4.66 million.

Single-family home sales rose 5.7 percent to a seasonally adjusted annual rate of 4.30 million in May from 4.07 million in April, but remain 5.7 percent below the 4.56 million pace a year ago. Existing condominium and co-op sales in May were at a seasonally adjusted annual rate of 590,000, the same figure as for both April and for May 2013.  

Lawrence Yun, NAR chief economist credited several factors for the rebounding market coming out of a weak first quarter. "Home buyers are benefiting from slower price growth due to the much-needed, rising inventory levels seen since the beginning of the year," he said. "Moreover, sales were helped by the improving job market and the temporary but slight decline in mortgage rates." 

The median existing-home price for all housing types in May was $213,400 a 5.1 percent gain from the median in May 2013.  The annual increase in April was 5.2 percent.  The May number continues the downward trend in appreciation from the double digit increases which were common last year.  In May 2013 the annual increase was 11.0 percent and during the first three months of 2014 the average increase in the median price was 8.6 percent.   

The single-family home price rose 4.9 percent from one year earlier to a median of $213,600.  The median existing condo price was $212,300 in May, which is 6.6 percent higher than a year ago.

Total housing inventory at the end of May climbed 2.2 percent to 2.28 million existing homes available for sale, a 5.6-month supply at the current sales pace.  There was a 5.7 month supply in April. Unsold inventory is 6.0 percent higher than a year ago, when there were 2.15 million existing homes available for sale.

Earlier this month, NAR reported that the construction of new homes is insufficient to meet demand in most of the country and some areas could face persistent housing shortages and affordability issues until construction catches up with local job creation.  Yun referred to this, saying "Rising inventory bodes well for slower price growth and greater affordability, but the amount of homes for sale is still modestly below a balanced market. Therefore, new home construction is still needed to keep prices and housing supply healthy in the long run."

Distressed homes sales accounted for 11 percent of May sales compared to 18 percent a year earlier.  Eight percent of sales were foreclosures which sold at an average discount of 18 percent and 3 percent of sales were short sales which were discounted an average of 11 percent.

The percent share of first-time buyers continued to underperform, representing less than one- third of all buyers at 27 percent in May, down from 29 percent in April; they were 29 percent in April 2013.  The investor share declined to 16 percent from 18 percent in April and in May 2013.  Sixty-eight percent of investors paid cash in May and cash sales accounted for 32 percent of all transactions.

NAR President Steve Brown said housing fundamentals are showing slight improvement in markets across the country. "Many potential buyers were left on the sidelines beginning last summer as affordability declined amidst rising home prices and interest rates.  The temporary pause in rising interest rates and more homes for sale is good news - especially for first-time home buyers - who likely have a better chance in upcoming months to make a competitive offer that's in return accepted by the seller."

Homes were on the market a median of 47 days in May, one day less than in April but longer than the 41 day marketing time in May 2013.  Short sales took a median of 125 days to close, foreclosures 57 days, and non-distressed homes 44 days.  Forty-one percent of homes sold in May were on the market for less than a month.

Regionally, existing-home sales in the Northeast rose 3.3 percent to an annual rate of 620,000 in May, but are 3.1 percent below a year ago. The median price in the Northeast was $256,700, down 0.9 percent from May 2013.

In the Midwest, existing-home sales jumped 8.7 percent to an annual rate of 1.13 million in May, but are still 7.4 percent below May 2013. The median price in the Midwest was $165,900, up 4.0 percent from a year ago.

Existing-home sales in the South increased 5.7 percent to an annual level of 2.05 million in May, but are down 0.5 percent from May 2013. The median price in the South was $184,800, up 4.4 percent from a year ago.

Existing-home sales in the West rose 0.9 percent to an annual rate of 1.09 million in May, and are 11.4 percent below a year ago. The median price in the West was $297,500, which is 8.4 percent above May 2013.