Inventory said to be holding back sales
According to the National Association of Realtors (NAR), there is a really good news, really bad news scenario regarding existing home sales (completed transactions) for May – existing home sales declined 1.5 percent for the month, but NAR points to tight inventory levels holding back closings. The trade association reports that sales maintained a strong lead (up 9.6 percent) over May 2011 levels, adding that home prices are on a “sustained uptrend in all regions.”
Dr. Lawrence Yun, NAR chief economist, said inventory shortages in certain areas have been building all year. “The slight pullback in monthly home sales is more likely due to supply constraints rather than softening demand. The normal seasonal upturn in inventory did not occur this spring,” he said.
“Even with the monthly decline,” Dr. Yun added, “home sales have moved markedly higher with 11 consecutive months of gains over the same month a year earlier.”
The inventory slide and housing’s recovery
NAR reports that total housing inventory at the end of May slipped 0.4 percent to a 6.6 month supply at the current sales pace, while listed inventory is 20.4 percent below a year ago when there was a 9.1 month supply. Unsold inventory has trended down from a record 4.04 million in July 2007, and supplies reached a cyclical peak of 12.1 months in July 2010.
Dr. Yun interprets the data to mean that “The recovery is occurring despite excessively tight credit conditions and higher downpayment requirements, which are negating the impact of record high affordability conditions.”
Low mortgage rates, rising home prices
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage declined to a record low 3.80 percent in May from 3.91 percent in April; the rate was 4.64 percent in May 2011; recordkeeping began in 1971.
The national median existing-home price for all housing types rose 7.9 percent to $182,600 in May from a year ago, the third consecutive month of year over year price gains. The NAR reports that the last time there were three back-to-back price increases from the same month a year earlier was from March to May of 2006.
“Some of the price gain results from a shrinking share distressed homes in the sales mix,” Dr. Yun explained. Distressed homes accounted for one in four sales in May (15 percent foreclosures, 10 percent short sales), down 3.0 percent for the month, and 6.0 percent for the year. Foreclosures sold for an average discount of 19 percent below market value in May, while short sales were discounted an average of 14 percent.
Prices up, but sales are slipping
First-time buyers accounted for 34 percent of purchasers in May, down 1.0 percent for the month and 2.0 percent for the year. All-cash sales fell 1.0 percent for the month to 28 percent, down 2.0 percent for the year.
Single-family home sales slipped 1.0 percent for the month, but are 10.4 percent May 2011 with the new median existing single-family home price hitting $182,900 in May, up 7.7 percent from a year ago.
Existing condominium and co-op sales fell 5.7 percent in April, but are 4.2 percent higher than one year ago. The median existing condo price was $180,000 in May, fully 8.8 percent above May 2011.
NAR reports that investors, who account for the majority of cash transactions purchased 17 percent of homes in May, down from 20 percent in April and 19 percent in May 2011. “These figures reflect a modest increase in traditional repeat home buyers in May,” Dr. Yun said.
Regional performances varied
NAR is reporting widespread inventory shortages in lower price ranges across all regions except the Northeast, adding that the West has tight supply in all price ranges except for the top price points. “Realtors® in Western states have been calling for an expedited process to get additional foreclosed properties onto the market because they have more buyers than available property,” Dr. Yun added.
Existing-home sales in the Northeast fell 4.8 percent to an annual level of 590,000 in May but are 7.3 percent higher than May 2011. The median price in the Northeast was $250,700, up 3.8 percent from a year ago.
Existing-home sales in the Midwest rose 1.0 percent in May to a pace of 1.04 million and are 19.5 percent above a year ago. The median price in the Midwest was $147,700, up 6.4 percent from May 2011.
In the South, existing-home sales slipped 0.6 percent to an annual level of 1.78 million in May but are 9.2 percent higher May 2011. The median price in the South was $159,700, up 7.8 percent from a year ago.
Existing-home sales in the West declined 3.4 percent to an annual pace of 1.14 million in May but are 3.6 percent above a year ago. The median price in the West was $233,900, up 13.4 percent from May 2011.