Existing Home Sales and Inventory Bouncing Back - Prices Too
Existing home sales broke out of a two-month slump in May, rising by 2.5 percent compared to April and beating, by a considerable margin, analysts' consensus expectations. The National Association of Realtors® said sales of single-family homes, townhomes, condominiums, and co-ops were at a seasonally adjusted annual rate of 5.34 million units compared to 5.19 million the previous month. The surge in sales however was not enough to bring sales up to the 5.40 million pace of the previous May; the shortfall was 1.1 percent. All four regions saw gains, with an especially strong one in the Northeast.
Analysts polled by Econoday had expected strong May data. Their forecasts ranged from 5.20 to 5.47 million with a consensus of 5.28 million.
Single-family home sales rose to an annual rate of 4.75 million in May from 4.63 million the prior month but were still down 0.8 percent from last May's 4.79 million sales rate. Condo and co-op sales were up 1.7 percent to 590,000 units but were 3.3 percent lower than in May 2018.
Lawrence Yun, NAR's chief economist, said the 2.5 percent jump shows that consumers are eager to take advantage of the favorable conditions. "The purchasing power to buy a home has been bolstered by falling mortgage rates, and buyers are responding."
Home prices are continuing to increase. The median existing-home price for all housing types in May was $277,700, up 4.8% from $265,100 a year earlier and the 87th straight month of year-over-year gains. The median existing single-family home price was $280,200, representing 4.6 percent appreciation, and the median existing condo price gained 5.4 percent to $257,100.
Inventory rose despite the faster rate of sales, growing to 1.92 million available homes at the end of May from 1.83 million in April. This was 2.7 percent annual increase from 1.87 million units a year ago. Unsold inventory is at a 4.3-month supply at the current sales pace, up from the 4.2-month supply in both April and one year ago. Yun noted that, even with the heightened supply, the numbers are still near historic lows and are having a direct effect on price. "Solid demand along with inadequate inventory of affordable homes have pushed the median home price to a new record high," he said.
Properties remained on the market for an average of 26 days in May, up from 24 days in April and equal to the 26 days in May of 2018. Fifty-three percent of homes sold in May were on the market for less than a month.
Given that housing and properties have been selling so quickly, Yun continued his call for new construction. "More new homes need to be built," he said. "Otherwise, we risk worsening the housing shortage, and an increasingly number of middle-class families will be unable to achieve homeownership."
"The month of May ushered in the home sales upswing that we had been expecting," said NAR President John Smaby. "Sales are strengthening in all regions while we see price appreciation for recent buyers."
First-time buyers were responsible for 32% of sales in May, unchanged from the 32% the month prior and up from the 31% recorded in May 2018. Individual investors accounted for 13 percent of sales and all cash sales, many of what are investor transactions, were at 19 percent. Distressed sales have become a nearly inconsequential factor, accounting for 2 percent of May sales. Less than 1 percent were short sales.
Existing-home sale numbers in the Northeast rose by 4.7 percent to an annual rate of 670,000, about equal to a year ago. The median price gained 6.6 percent to $304,100.
In the Midwest sales were up 3.4 percent to an annual rate of 1.22 million but fell short of the May 2018 levels by 3.9 percent. The median price was $220,500, an increase of 5.6 percent from a year ago.
Sales in the South were up 1.8 percent and 1.3 percent from April and a year ago to an annual rate of 2.32 million. Home appreciated to a median of $241,400, an increase of 3.6 percent.
Existing-home sales in the West grew 1.8 percent to an annual rate of 1.13 million in May and were 3.4 percent lower than a year earlier. The median price was $409,100, up 4.1 percent from May 2018.