May Existing Home Sales Up 2.5%

Existing home sales, buoyed by falling interest rates, rose for the first time in two months in May, the National Association of Realtors reported Friday.

NAR said total existing-home jumped by 2.5% from April to a seasonally adjusted annual rate of 5.34 million; However, sales fell by 1.1% from a year ago (5.40 million).

Single-family home sales came in at a seasonally adjusted annual rate of 4.75 million in May, up from 4.63 million in April but down 0.8% from 4.79 million a year ago. The median existing single-family home price rose to $280,200 in April, up 4.6% from May 2018. Existing condominium and co-op sales rose to 590,000 units in May, up 1.7% from the prior month but down 3.3% from a year ago. The median existing condo price rose to $257,100 in May, up 5.4% from a year ago.

All four regions saw sales increases. Sales in the South rose by 1.8% to an annual rate of 2.32 million in May, up 1.3% from a year ago. The median price in the South rose to $241,400, up 3.6% from a year ago. In the West, sales also rose by 1.8% to an annual rate of 1.13 million in May, but 3.4% below a year ago. The median price in the West rose to $409,100, up 4.1% from a year ago.

In the Northeast, sales increased by 4.7% to an annual rate of 670,000 in May from April and unchanged from a year ago. The median price in the Northeast rose to $304,100, up 6.6% from a year ago. In the Midwest, sales rose by 3.4% to an annual rate of 1.22 million in May from April, but fell by 3.9% from a year ago. The median price in the Midwest rose to $220,500, an increase of 5.6% from a year ago.

“Data on existing-home sales for May showed a number of positive trends,” said Mike Fratantoni, Chief Economist with the Mortgage Bankers Association. “First, on an unadjusted basis, the level of sales increased relative to last year at this time, which is in line with what we have been seeing in MBA’s purchase applications data. The year-over-year sales growth was strongest in the South, which typically accounts for the largest portion of sales nationally.

“Second, the inventory of homes on the market increased, both in raw numbers and in terms of month’s supply. Tight inventories remain a constraint on the pace of sales, but it is good to see more supply coming onto the market.

“Finally, home prices continue to increase, but still at a slower pace than in recent years, and more in line with the rate of income growth. Combined with lower mortgage rates, these trends should help additional first-time homebuyers enter the market in the coming months.”

Mark Vitner, Senior Economist with Wells Fargo Securities, Charlotte, N.C., said home sales continue to gradually improve as mortgage rates trend lower.

“The recent rise in inventories should support sales in coming months,” Vitner said. “Home price appreciation has been cooling recently; however strong sales in the relatively high-priced Northeast and West likely provided a boost to prices during May.”

NAR Chief Economist Lawrence Yun said the 2.5% 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,” he said.

Last week, Ellie Mae, Pleasanton, Calif., and First American Financial Corp., Santa Ana, Calif., said lower rates are stirring interest in homes and getting current owners interested in selling and moving up.

First American Chief Economist Mark Fleming said home buyers have been encouraged by unexpectedly lower mortgage rates in 2019, creating a “tailwind” helping to boost demand-and just as importantly, inspiring existing homeowners to sell their homes.

Fleming noted throughout 2017 and 2018, homeowners faced a “prisoner’s dilemma,” a situation where many homeowners were “imprisoned” in their current home by the fear of not finding a home to buy and the fear of losing their historically low mortgage rate. Now, he said, homeowners may finally be on the verge of escaping that dilemma.

“Not only have concerns over limited supply eased as an obstacle to homeownership, homeowners appear to be more willing to list their homes for sale because they are more confident in finding a home to buy,” Fleming said.

NAR reported the median existing-home price for all housing types in May rose to $277,700, up 4.8% from a year ago ($265,100), marking the 87th straight month of year-over-year gains.

Total housing inventory at the end of May increased to 1.92 million, up from 1.83 million in April and a 2.7% increase from 1.87 million a year ago. Unsold inventory is at a 4.3-month supply at the current sales pace, up from both the 4.2 month supply in April and from 4.2 months a year ago. Yun said though inventory is up, the months’ supply numbers remain near historic lows, which has 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.

NAR 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 a year ago. Fifty-three percent of homes sold in May were on the market for less than a month.

The report said first-time buyers represented 32% of sales in May, unchanged from April but up from 31% a year ago. All-cash sales accounted for 19% of transactions in May, down from April and a year ago (20% and 21%, respectively). Individual investors purchased 13% of homes in May, down from 16% in April and from 14% a year ago.

NAR said distressed sales represented 2% of sales in May, down from 3% in April and from 3% a year ago. Fewer than 1% of May sales were short sales.