May's Poor Existing Sales Show the Effects of Lockdown

Existing-home sales fell again in May, although only at a little more than half the rate of decline in April. Still, it marked the third month of falling sales as a result of the coronavirus outbreak.

The National Association of Realtors® (NAR) said sales of previously owned single-family houses, townhomes, condos, and cooperative apartments sold at an annual rate of 3.91 million units during the month, a month-over-month decline of 9.7 percent. Existing home sales are now 26.6 percent lower than in May of 2019 when the annual rate was 5.33 million units. Sales have seen an aggregate decline over the last three months of 36.0 percent.

The annual rate was below the mid-range of predictions from analysts polled by Econoday. They had a consensus forecast of 4.39 million units within a range of 3.50 to 4.95 million.

The annualized rate of sales for existing single-family homes fell 9.4 percent from April to 3.94 million and is down 24.8 percent from one year ago. Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 340,000 units in May, down 12.8 percent and 41.4 percent from the two earlier periods.

"Sales completed in May reflect contract signings in March and April - during the strictest times of the pandemic lockdown and hence the cyclical low point," said Lawrence Yun, NAR's chief economist. "Home sales will surely rise in the upcoming months with the economy reopening, and could even surpass one-year-ago figures in the second half of the year."

The median existing-home price for all housing types in May was $284,600, a 2.3 percent gain from May 2019 ($278,200), as prices increased in every region. It was the 99th straight month of year-over-year gains. The median existing single-family home price was $287,700, 2.4 percent annual growth, but condo prices declined 1.6 percent $252,300.

At least the declining sales meant more available homes for those looking to buy. At the end of May the nationwide inventory stood at 1.55 million units, up 6.2 percent from April although still down 18.8 percent from a year earlier when there were 1.91 million homes for sale. Unsold inventory sits at a 4.8-month supply at the current sales pace, compared to 4.0 months in April and the 4.3-month figure recorded in May 2019.

"New home construction needs to robustly ramp up in order to meet rising housing demand," Yun said. "Otherwise, home prices will rise too fast and hinder first-time buyers, even at a time of record-low mortgage rates."

Fifty-eight percent of homes sold last month were on the market for less than a month.

First-time buyers accounted for 34 percent of sales in May, 2 percentage points lower than in April, but 2 points higher year-over-year. Individual investors or second-home buyers, who account for many cash sales, purchased 14 percent of homes in May, up by 4 points from April. Seventeen percent of transactions in May were all-cash. Three percent of May sales were short sales or foreclosures.

"Although the real estate industry faced some very challenging circumstances over the last several months, we're seeing signs of improvement and growth, and I'm hopeful the worst is behind us" said NAR President Vince Malta, "NAR, along with our partners and 1.4 million members, are already working to reignite America's real estate industry, which will be a key driver in our nation's economic recovery."

"Relatively better performance of single-family homes in relation to multifamily condominium properties clearly suggest migration from the city centers to the suburbs," Yun said. "After witnessing several consecutive years of urban revival, the new trend looks to be in the suburbs as more companies allow greater flexibility to work from home."

Each of the four major regions witnessed dips in month-over-month and sales, with the Northeast experiencing the greatest monthly decline. Those sales were down 13.0 percent to an annual rate of 470,000, a 29.9 percent decrease from a year ago. The median price in the Northeast was $327,900, annual appreciation of 7.8 percent.

Existing-home sales fell 10.0 percent in the Midwest to 990,000 annualized units, a 20.2 percent decrease year-over-year. The median price rose 3.0 percent to $227,400.

The South saw sales drop 8.0 percent and 25.1 percent from the earlier rates to 1.73 million units. The median price was $247,400, 2.1 percent growth on an annual basis.

There was an 11.1 percent sales reduction in the West's annual sales to 720,000 and a 35.1 percent decline from a year ago. The median price dipped 0.2 percent to $408,400.