Housing has been sliding which adds importance to May’s very solid 1.1 percent rebound in existing home sales to a higher-than-expected 5.620 million annualized rate. Today’s report is mostly solid throughout and includes gains for single-family homes, up 1.0 percent to a 4.980 million rate, and also condos, up 1.6 percent to a 640,000 rate.
The sales gains did not come at the expense of price concessions as the median price rose 3.2 percent to $252,800. Year-on-year, the median is up 5.8 percent and shows seller strength relative to a 2.7 percent gain for on-year sales.
Another positive is supply which, aided by strength in prices, is moving into the market, to 1.960 million vs 1.920 million in April and 1.800 million in March. Relative to sales, supply is at 4.2 months vs 4.1 and 3.8 in the prior two months.
The South is the leading and by far the largest region for sales, up 2.2 percent on the month for a 4.5 percent on-year gain to a 2.340 million rate. The West is next, up a monthly 3.4 percent to 1.220 million and a 3.4 percent gain from last year. The Northeast, which had been lagging, is showing life, up 6.8 percent on the month with the year-on-year rate up 2.6 percent at 780,000. Sales in the Midwest are May’s only negative, down 5.9 percent and down 0.8 percent on the year at 1.280 million.
The housing sector opened the year strongly but mostly fizzled during the Spring selling season. Yet this report limits that weakness and should confirm expectations for a bounce back in Friday’s new home sales report. Watch next week for pending home sales which will offer an advance indication on existing home sales in June.
Time to Sell Hits New Low
Existing home sales weren’t expected to strengthen in May, in fact analysts were looking for a slight decline. Sales however did manage to recover from a significant April loss while inventories increased slightly and the median sales price rose to a new high.
The National Association of Realtors® (NAR) said completed sales of existing single-family houses, townhouses, condos, and cooperative apartments rose 1.1 percent to a seasonally adjusted annual rate of 5.62 million. This was a 2.7 percent year-over-year gain.
April’s sales had tumbled by 2.3 percent compared to the previous month. Those sales were revised lower still, from the original rate of 5.570 million to 5.560 million.
Analysts polled by Econoday had expected sales to be in the annual range of 5.450 million to 5.650 million. The consensus was in the exact middle at 5.550 million.
Lawrence Yun, NAR chief economist, commented on the positive May numbers, saying that buyers were able to overcome increasingly challenging market conditions in many areas. “The job market in most of the country is healthy and the recent downward trend in mortgage rates continues to keep buyer interest at a robust level,” he said.
“Those able to close on a home last month are probably feeling both happy and relieved. Listings in the affordable price range are scarce, homes are coming off the market at an extremely fast pace and the prevalence of multiple offers in some markets are pushing prices higher.”
The percentage of first-time buyers is not improving. They accounted for a 33 percent share of sales in May, 1 percentage point lower than in April. NAR said the average share for all of 2016 was 35 percent. Individual investors purchased 16 percent of homes sold during the month and 64 percent of them paid cash. Twenty-two percent of transactions were all cash in May.
Happy and Relieved
The Econoday parrot, quick to jump on any positive may be reading too much into one month. The NAR parrot was even more amusing.
Existing home sales were down 2.3% in April and new home sales were down 11.4%. For the quarter, sales are down 1.3% with two months reporting.
For the quarter, existing home sales are down 1.3% with two months reporting. Let’s not get too excited.
The percentage of first-time buyers is not improving because they still cannot afford a house. And anyone “happy and relieved” about overpaying in this clearly overpriced market will soon have other thoughts.
What happens when investment demand and flippers dry up?
Mike “Mish” Shedlock