Existing home sales declined for the fourth straight month due to very low housing supply in the market.
According to the National Association of Real Estate Agents, existing home sales in May fell 0.9% from the previous month to a seasonally adjusted annual rate of 5.8 million units. That is the fourth consecutive month of decline. The proportion of 5.8 million people is slightly above the pre-pandemic level.
Sales increased 44.6% year-on-year, but the comparison is heavily distorted as the housing market is basically closed for about two months after the pandemic. After that, the market recovered dramatically last summer and remained strong throughout the last year.
Lawrence Yun, Chief Economist of the National Association of Realtors, said: “Inventory shortages continue to be the overwhelming factor hindering home sales, but lower affordable prices simply keep some first-time buyers out of the market.”
The number of homes sold at the end of May was 1.23 million, a decrease of 20.6% from a year ago. At the current sales pace, representing a 2.5 month supply.
Prices continue to rise abnormally due to very low inventories amid high demand. The median existing homes in May were $ 350,300, up 23.6% from May 2020. Not only is this the highest median ever recorded, but it is also the strongest annual rate of increase ever.
However, the price is distorted by the combination of sales. The market is currently leaning towards a much higher supply limit for sellers. For example, home sales of $ 100,000 to $ 250,000 were down 2% year-on-year, while home sales of $ 750,000 to $ 1 million were up 178%.
Sales declined in all regions except the Midwest, where home prices are lowest.
Mortgage rates fell fairly sharply in April, when most of these contracts were signed. According to Mortgage News Daily, the average interest rate for the 30 years ending in March was 3.45%, below 3% by the beginning of May. It would have helped give buyers some additional purchasing power, but lower prices were clearly not enough to offset the surge in home prices.
According to the US Census, new home sales were based on signed contracts rather than closures, down 6% in April compared to March. Prices for these homes have risen about 20% year-on-year.
George Ratiu, Senior Economist at realtor.com, said: “Inflation is squeezing consumer budgets, and the Federal Reserve Board has shown that monetary easing may be withdrawn sooner than expected, so interest rates and high prices are affordable to buyers. Will keep it at the forefront. “
Existing home sales in the US May 2021
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