Existing-Home Sales Backpedal, Decrease 0.4 Percent in May

Lawrence Yun, NAR chief economist, says a solid economy and job market should be generating a much stronger sales pace than what has been seen so far this year. “Closings were down in a majority of the country last month and declined on an annual basis in each major region,” he said. “Incredibly low supply continues to be the primary impediment to more sales, but there’s no question the combination of higher prices and mortgage rates are pinching the budgets of prospective buyers, and ultimately keeping some from reaching the market.”

The median existing-home price² for all housing types in May was $264,800, an all-time high and up 4.9 percent from May 2017 ($252,500). May’s price increase marks the 75th straight month of year-over-year gains.

Total housing inventory³ at the end of May climbed 2.8 percent to 1.85 million existing homes available for sale, but is still 6.1 percent lower than a year ago (1.97 million) and has fallen year-over-year for 36 consecutive months. Unsold inventory is at a 4.1-month supply at the current sales pace (4.2 months a year ago).

Properties typically stayed on the market for 26 days in May, unchanged from April and down from 27 days a year ago. Fifty-eight percent of homes sold in May were on the market for less than a month.

“Inventory coming onto the market during this year’s spring buying season – as evidenced again by last month’s weak reading – was not even close to being enough to satisfy demand,” added Yun. “That is why home prices keep outpacing incomes and listings are going under contract in less than a month – and much faster – in many parts of the country.”

Realtor.com®’s Market Hotness Index, measuring time-on-the-market data and listings views per property, revealed that the hottest metro areas in May were Midland, Texas; Boston-Cambridge-Newton, Mass.; San Francisco-Oakland-Hayward, Calif.; Columbus, Ohio; and Vallejo-Fairfield, Calif.

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage increased for the seventh straight month to 4.59 percent in May (highest since 4.64 percent in May 2011) from 4.47 percent in April. The average commitment rate for all of 2017 was 3.99 percent.

“The abrupt hike in mortgage rates this spring, along with price appreciation and competition being the strongest in the entry-level part of the market, is why first-time buyers are not as active as they should be and their participation remains below its historical average,” said Yun.

First-time buyers were 31 percent of sales in May, which is down from 33 percent both last month and a year ago. NAR’s 2017 Profile of Home Buyers and Sellers – released in late 2017⁴ – revealed that the annual share of first-time buyers was 34 percent.

“REALTORS® in many parts of the country say their seller clients are dealing with a seesaw of emotions when deciding to put their home on the market,” said NAR President Elizabeth Mendenhall, a sixth-generation REALTOR® from Columbia, Missouri and CEO of RE/MAX Boone Realty. “While they’re thrilled that they will immediately find multiple buyers interested in their listing, many fear they’ll have extreme difficulty finding another home to buy. Some have even decided to hold off until inventory conditions start improving, which is actually only exacerbating supply shortages.”

All-cash sales were 21 percent of transactions in May, which is unchanged from April and down from 22 percent a year ago. Individual investors, who account for many cash sales, purchased 15 percent of homes in May, unchanged from last month and down from 16 percent a year ago.

Distressed sales⁵ – foreclosures and short sales – were 3 percent of sales in May (lowest since NAR began tracking in October 2008), down from 4 percent last month and 5 percent a year ago. Two percent of May sales were foreclosures and 1 percent were short sales.

Single-family and Condo/Co-op Sales

Single-family home sales declined 0.6 percent to a seasonally adjusted annual rate of 4.81 million in May from 4.84 million in April, and are 3.0 percent below the 4.96 million sales pace a year ago. The median existing single-family home price was $267,500 in May, up 5.2 percent from May 2017.

Existing condominium and co-op sales increased 1.6 percent to a seasonally adjusted annual rate of 620,000 units in May, but are still 3.1 percent below a year ago. The median existing condo price was $244,100 in May, which is 2.5 percent above a year ago.

Regional Breakdown

May existing-home sales in the Northeast increased 4.6 percent to an annual rate of 680,000, and but are 11.7 percent below a year ago. The median price in the Northeast was $275,900, which is down 1.8 percent from May 2017.

In the Midwest, existing-home sales declined 2.3 percent to an annual rate of 1.26 million in May, and are now 2.3 percent below a year ago. The median price in the Midwest was $209,900, up 4.2 percent from a year ago.

Existing-home sales in the South inched backward 0.4 percent to an annual rate of 2.32 million in May, and are unchanged from a year ago. The median price in the South was $233,100, up 4.5 percent from a year ago.

Existing-home sales in the West decreased 0.8 percent to an annual rate of 1.17 million in May, and are 4.1 percent below a year ago. The median price in the West was $395,800, up 7.2 percent from May 2017.

The National Association of REALTORS® is America’s largest trade association, representing 1.3 million members involved in all aspects of the residential and commercial real estate industries.

NOTE: For local information, please contact the local association of REALTORS® for data from local multiple listing services. Local MLS data is the most accurate source of sales and price information in specific areas, although there may be differences in reporting methodology.

¹ Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings from Multiple Listing Services. Changes in sales trends outside of MLSs are not captured in the monthly series. NAR rebenchmarks home sales periodically using other sources to assess overall home sales trends, including sales not reported by MLSs.

Existing-home sales, based on closings, differ from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which account for more than 90 percent of total home sales, are based on a much larger data sample – about 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.

The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.

Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began. Prior to this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.

² The median price is where half sold for more and half sold for less; medians are more typical of market conditions than average prices, which are skewed higher by a relatively small share of upper-end transactions. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if additional data is received.

The national median condo/co-op price often is higher than the median single-family home price because condos are concentrated in higher-cost housing markets. However, in a given area, single-family homes typically sell for more than condos as seen in NAR’s quarterly metro area price reports.

³ Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982 (prior to 1999, single-family sales accounted for more than 90 percent of transactions and condos were measured only on a quarterly basis).

⁴ Survey results represent owner-occupants and differ from separately reported monthly findings from NAR’s REALTORS® Confidence Index, which include all types of buyers. Investors are under-represented in the annual study because survey questionnaires are mailed to the addresses of the property purchased and generally are not returned by absentee owners. Results include both new and existing homes.

⁵ Distressed sales (foreclosures and short sales), days on market, first-time buyers, all-cash transactions and investors are from a monthly survey for the NAR’s REALTORS® Confidence Index, posted at nar.realtor.
 

Source: "Existing-Home Sales Backpedal, Decrease 0.4 Percent in May" www.nar.realtor® (June 20, 2018)