Existing Home Sales Hit Highest Pace in Nine Years
Existing home sales jumped in May to their highest pace in nearly a decade, while an uptick in demand amidst lagging supply levels pushed the median sales price to a record high, the National Association of Realtors reported yesterday.
NAR said total existing-home sales rose by 1.8 percent to 5.53 million in May, seasonally adjusted, from a downwardly revised 5.43 million in April. With last month’s gain, sales rose by4.5 percent from a year ago (5.29 million) and reached their highest annual pace since February 2007 (5.79 million).
The report said single-family home sales increased by 1.9 percent to 4.90 million in May from 4.81 million in April, and improved by 4.7 percent from the 4.68 million pace a year ago. The median existing single-family home price rose to $241,000 in May, up 4.6 percent from a year ago.
Existing condominium and co-op sales rose by 1.6 percent to 630,000 units in May from 620,000 in April, and by 3.3 percent from a year ago (610,000 units). The median existing condo price rose to $229,600 in May, 6.0 percent above a year ago.
Regionally, only the Midwest saw a decline. Sales in the South rose by 4.6 percent to an annual rate of 2.28 million in May, and improved by 6.5 percent from a year ago. The median price in the South rose to $211,500, up 5.9 percent from a year ago. Sales in the West jumped 5.4 percent to 1.18 million in May, but were 1.7 percent lower than a year ago. The median price in the West rose to $346,900, 7.7 percent above May 2015.
Sales in the Northeast increased by 4.1 percent to 770,000 in May and by 11.6 percent from a year ago. The median price in the Northeast fell slightly to $268,600, 0.1 percent slower than a year ago. In the Midwest, sales fell by 6.5 percent to 1.30 million in May, but improved by 3.2 percent from a year ago. The median price in the Midwest rose to $190,000, up 4.8 percent from a year ago.
“Home buyers appear to have ignored the conflicting signals on economic growth that have unnerved the financial markets and kept the Federal Reserve on hold,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “The extended run of lower mortgage rates is good news for the recovering housing market, which saw existing home sales rise to their strongest pace in more than nine years in May, even though for-sale inventories remain exceptionally low across much of the country.”
Vitner said the extended run of extraordinarily low mortgage rates is “clearly” bringing trade-up buyers back into the market. “Many buyers might have been hesitant to given up their current low-rate mortgage that they refinanced into a few years ago, but now are looking at essentially the same mortgage rates that they were three years ago,” he said. “Homeowners that refinanced a few years ago have likely built up significant equity in their homes, as a higher proportion of their mortgage payments has gone toward principal repayment and home prices have risen steadily.”
NAR Chief Economist Lawrence Yun said this spring’s sustained period of ultra-low mortgage rates has been a worthy incentive to buy a home. “But the primary driver in the increase in sales is more homeowners realizing the equity they’ve accumulated in recent years and finally deciding to trade-up or downsize,” he said. “With first-time buyers still struggling to enter the market, repeat buyers using the proceeds from the sale of their previous home as their down payment are making up the bulk of home purchases right now.”
Surpassing the peak median sales price set last June ($236,300), the median existing home price for all housing types in May was $239,700, up 4.7 percent from a year ago ($228,900). May’s price increase marks the 51st consecutive month of year-over-year gains.
NAR said total housing inventory at the end of May rose by 1.4 percent to 2.15 million existing homes available for sale, but remains 5.7 percent lower than a year ago (2.28 million). Unsold inventory is at a 4.7-month supply at the current sales pace, unchanged from April.
The report said the share of first-time buyers fell to 30 percent in May, down from 32 percent both in April and a year ago. First-time buyers in all of 2015 also represented an average of 30 percent.
Properties typically stayed on the market for 32 days in May (39 days in April), below a year ago (40 days) and the shortest time since NAR began tracking in May 2011. Short sales were on the market the longest at a median of 103 days in May, while foreclosures sold in 51 days and non-distressed homes took 30 days. Forty-nine percent of homes sold in May were on the market for less than a month, the highest percentage since NAR began tracking.
NAR said all-cash sales were 22 percent of transactions in May, down from both 24 percent in April and a year ago. Individual investors, who account for many cash sales, purchased 13 percent of homes in May, unchanged from April and down from 14 percent a year ago. Sixty-three percent of investors paid cash in May.
Distressed sales declined to 6 percent of sales in May, down from 7 percent in April and 10 percent a year ago. Five percent of May sales were foreclosures, while 1 percent were short sales. Foreclosures sold for an average discount of 12 percent below market value in May (17 percent in April), while short sales were discounted 11 percent (10 percent in April).
