Existing Home Sales Fall Second Straight Month in May

Existing-home sales in May fell for a second straight month amid shortage of supply and rising prices, the National Association of Realtors said in a report on Wednesday.

Total existing sales were declined 0.4% to a seasonally adjusted annual rate of 5.43 million last month from a downwardly revised 5.45 million April, the NAR said. Sales are now 3% below a year earlier and have fallen year-over-year for three consecutive months.

A solid economy should be generating a stronger sales pace than what’s been seen so far this year, NAR Chief Economist Lawrence Yun said.

“Closings were down in a majority of the country last month and declined on an annual basis in each major region,” he said. “Incredibly low supply continues to be the primary impediment to more sales, but there’s no question the combination of higher prices and mortgage rates are pinching the budgets of prospective buyers, and ultimately keeping some from reaching the market.”

The median price for a home was $264,800 in May, a record high and up from $252,500 in May 2017. That marks the 75th straight month of year-on-year gains, the NAR said.

Inventories at the end of the month rose 2.8% to 1.85 million, but that’s down 6.1% from a year earlier. Supplies on an annual basis have fallen annually for 36 straight months. Unsold inventory is little changed year-over-year at 4.1 months. Houses are staying on the market for 26 days, unchanged from the month earlier and down from 27 days a year earlier. Some 58% of homes sold in May were on the market for less than a month, the NAR said.

The number of homes coming available wasn’t close to being enough to meet demand, Yun said.

“That is why home prices keep outpacing incomes and listings are going under contract in less than a month – and much faster — in many parts of the country,” he said.

The hottest markets according to Realtor.com’s Market Hotness Index showed the hottest metro areas were Midland, Texas, Boston, Mass., San Francisco-Oakland and Columbus, Ohio.

The average interest rate for a 30-year conventional fixed-rate loan rose for a seventh straight month to 4.59%, the highest in seven years, according to Freddie Mac. The average commitment rate for all of 2017 was 3.99%, the NAR said.

The increase in mortgage rates, along with price appreciation and competition being strongest for entry-level buyers is why buyers aren’t as active as they should be, Yun said. First-time buyers composed 31% of sales in May, down from 33% in April and the same month in 2017.

Realtors said sellers are pleased that many people are interested in their houses but worry that they won’t be able to find a replacement.

“While they’re thrilled that they will immediately find multiple buyers interested in their listing, many fear they’ll have extreme difficulty finding another home to buy,” said NAR President Elizabeth Mendenhall, a realtor from Columbia, Missouri, and chief executive of Re/Max Boone Realty. “Some have even decided to hold off until inventory conditions start improving, which is actually only exacerbating supply shortages.”

Single-family home sales declined 0.6% to a seasonally adjusted annual rate of 4.81 million in May from 4.84 million in April, and are 3% below the 4.96 million sales pace a year ago, the association said. Condo and co-op sales rose 1.6% to a rate of 620,000 units last May, but are down 3.1% from a year ago.

Sales in the northeast increased 4.6% month-to-month, but are down almost 12% from last year. The median price in the northeast was $275,900, down 1.8% from May 2017, the NAR said.