Existing-Home Sales Constrained by Tight Supply in May, Prices Continue to Gain
WASHINGTON (June 21, 2012) – Limited supplies of housing inventory held back existing-home sales in May, but sales maintained a strong lead over year-ago levels and home prices are on a sustained uptrend in all regions, according to the National Association of Realtors®.
Total existing-home sales1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, declined 1.5 percent to a seasonally adjusted annual rate of 4.55 million in May from 4.62 million in April, but are 9.6 percent above the 4.15 million-unit pace in May 2011.
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, home sales have moved markedly higher with 11 consecutive months of gains over the same month a year earlier."
There are broad-based shortages of inventory in the lower price ranges in much of the country except the Northeast, and in the West supply is extremely tight in all price ranges except for the upper end. "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," Yun added. Widespread inventory shortages also are found in much of Florida.
Total housing inventory at the end of May slipped 0.4 percent to 2.49 million existing homes available for sale, which represents a 6.6-month supply2 at the current sales pace; there was a 6.5-month supply in April. 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; supplies reached a cyclical peak of 12.1 months in July 2010.
"The recovery is occurring despite excessively tight credit conditions and higher downpayment requirements, which are negating the impact of record high affordability conditions," Yun said.
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 price3 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 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," Yun explained.
Distressed homes4 - foreclosures and short sales sold at deep discounts - accounted for 25 percent of May sales (15 percent were foreclosures and 10 percent were short sales), down from 28 percent in April and 31 percent in May 2011. Foreclosures sold for an average discount of 19 percent below market value in May, while short sales were discounted 14 percent.
NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, offers advice to buyers in markets with limited supply. "We are hearing a lot about multiple bidding and quick sales in areas with tight supply, with competition between first-time buyers and cash investors, who have a significant advantage," he said.
"It's extremely important to listen to the advice of your agent and perform all the due diligence that you would normally do in a more balanced market, such as making offers contingent upon a satisfactory home inspection," Veissi said.
First-time buyers accounted for 34 percent of purchasers in May, compared with 35 percent in April and 36 percent in May 2011.
All-cash sales slipped to 28 percent of transactions in May from 29 percent in April; they were 30 percent in May 2011. Investors, who account for the bulk of cash sales, 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," Yun said.
Single-family home sales slipped 1.0 percent to a seasonally adjusted annual rate of 4.05 million in May from 4.09 million in April, but are 10.4 percent above the 3.67 million-unit level in May 2011. The median existing single-family home price was $182,900 in May, up 7.7 percent from a year ago.
Existing condominium and co-op sales fell 5.7 percent to a seasonally adjusted annual rate of 500,000 in May from 530,000 in April, but are 4.2 percent higher than the 480,000-unit pace one year ago. The median existing condo price was $180,000 in May, which is 8.8 percent above May 2011.
Regionally, 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. "The sharp price increase in the West results largely from more sales at the upper end of the market," Yun explained.
The National Association of Realtors®, "The Voice for Real Estate," is America's largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.
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NOTE: For local information, please contact the local association of Realtors® for data from local multiple listing services. Local MLS data is the most accurate source of sales and price information in specific areas, although there may be differences in reporting methodology.
1Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings from multiple listing services. Changes in sales trends outside of MLSs are not captured in the monthly series. A rebenchmarking of home sales is done periodically using other sources to assess the overall home sales trend, including sales not reported by MLSs.
Existing-home sales differ from the U.S. Census Bureau's series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which account for more than 90 percent of total home sales, are based on a much larger sample - about 40 percent of multiple listing service data each month - and typically are not subject to large prior-month revisions.
The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.
Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began. Prior to this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.
2Total inventory and month's supply data are available back through 1999, while single-family inventory and month's supply are available back to 1982 (prior to 1999, condos were measured quarterly while single-family sales accounted for more than 90 percent of transactions).
3The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if more data is received than was originally reported.
4Distressed sales (foreclosures and short sales), all-cash transactions, investors and first-time buyers and are from a monthly survey for the Realtors® Confidence Index, posted at nar.realtor.
The Pending Home Sales Index for May will be released June 27 and existing-home sales for June is scheduled for July 19; release times are 10:00 a.m. EDT.