U.S. existing home sales remain weak in May despite low mortgage rates

U.S. sales of existing homes declined 3.8% in May to a seasonally adjusted annual rate (SAAR) of 4.81 million units, the National Association of Realtors reported on June 21. This decline follows a 1.8% decline in April, a 3.5% increase in March, and a significant decline of 8.9% in February. Existing home sales are currently 15.3% below their level a year ago, and 33.7% below their September 2005 peak. Sales at this point last year were higher mainly due to the home buyer tax credit, and May 2011 sales were adversely affected by weather to an extent.  Overall, existing home sales have increased in six of the past 12 months, which highlights the slow recovery in sales and home prices.  Meanwhile, despite mortgage rates being at 4.58% at the end of May and currently at a year-to-date low of 4.51%, the lack of demand continues to pressure home sales and prices.  Although seasonally adjusted data tends to be a better indicator, the only good news in the latest data was that seasonally unadjusted sales in fact increased 4.8% and across all four regions in May.

Highlights of May’s existing home sales report is as follows:

  • Existing home sales were down 3.8% based on the completed transactions in May. This decline in sales comes after a 1.8% decline in April and a 3.5% increase in March. However, existing sales were down 15.3% year over year, and the 12-month change has been mostly negative since June 2010. Higher sales a year ago were related to the home buyer tax credit, which makes a comparison not necessarily informative.
  • Existing home sales peaked in September 2005 and declined about 33.7% through May 2011. However, existing sales improved significantly during late 2009 through early 2010, primarily as a result of the U.S. government’s now-expired tax incentives.
  • Existing sales declined in all regions except the West in May. Existing sales in the South decreased 5.1% in May and are 14.4% below their May 2010 level. Existing sales in the Northeast declined 2.5%, but declined 13.5% year over year. Existing sales in the Midwest declined 6.4% in May, but declined 22.7% from a year ago. Finally, existing sales in the West was unchanged in May and declined 10% year over year.
  • Existing condominium and co-op sales dropped 8.1% in May, and single-family home sales dipped 3.2%.
  • First-time home buyers accounted for 35% of sales in May, down from 36% a month ago. Also, cash transactions were 30% of May sales.
  • The national median home sale price was $166,500 last month, up 3.4% from April, but down 4.6% from a year ago, and down across all regions except in the Northeast on a year-over-year basis.
  • April’s official inventory is 3.72 million homes, down 1% from a month earlier. The months’ supply increased to 9.3 months in May from 9 months in April at the current sale pace. This does not include the unofficial shadow inventory, which remains the key concern for the housing market recovery in addition to high unemployment
  • High levels of distressed sales are likely to push home prices lower because distressed homes are usually sold at a discount. Distressed sales were about 31% of total sales in May, down from 37% in April. Distressed sales were 31% of May 2010’s total.

To see the full report, click here.


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One Comment

  1. Garreth Wilcock says:

    This is great stuff – I love the aggregate data. Is median price a good proxy for the housing market though? I would argue that homes selling at a different price range would influence this number just as much as a shift in the value of any given home.

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