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Existing-home sales post rebound in May

After two lackluster months, May saw a rebound in existing-home sales, with all of the regions tracked by the National Association of Realtors (NAR) seeing growth.

House(1)Total existing-home sales sprang up 2.5 percent from April, landing at a seasonally adjusted annual rate of 5.34 million. Total sales are still down 1.1% from last year’s May rate of 5.40 million, but after scarce movement since April, economists are optimistic that homebuyers are finally coming around to the favorable landscape.

“The purchasing power to buy a home has been bolstered by falling mortgage rates,” said Lawrence Yun, chief economist at the NAR, “and buyers are responding.”

“The month of May ushered in the home sales upswing that we had been expecting,” echoed NAR President John Smaby. “Sales are strengthening in all regions while we see price appreciation for recent buyers.”

Without seasonal adjustment, the level of sales did increase relative to the same time last year, which Mike Fratantoni, Mortgage Bankers Association (MBA) chief economist, noted is in line with the MBA’s purchase application data.

The Northeast saw the biggest seasonally adjusted monthly surge, with existing-home sales growing 4.7% from April to May. The Midwest saw 3.4% growth, while the South and West both posted 1.8% gains. Fratantoni observed that unadjusted year-over-year sales growth was strongest in the South, which usually accounts for the largest share of sales nationally.

The median existing-home price for May was $277,700, up 4.8% from May 2018. The price increase marks the 87th consecutive month with a year-over-year gain.

Prices, Fratantoni said, grew “at a slower pace than in recent years, and more in line with the rate of income growth. Combined with lower mortgage rates, these trends should help additional first-time homebuyers enter the market in the coming months.”

First-time buyers account for 32% of all May sales, consistent with the previous month and slightly up from the 31% in May 2018.

Properties are remaining on the market for longer, averaging 26 days in May — flat year-over-year — after a 24-day average in April. That’s a slight boost to supply, helping total housing inventory at the end of May grow to 1.92 million. That’s up from 1.83 million in April and a 2.7% increase from 1.87 million during May last year. Unsold inventory is currently at a 4.3-month supply at the current sales pace, up from 4.2 months in April and 4.2 months in May 2018.

“[T]he inventory of homes on the market increased, both in raw numbers and in terms of month’s supply,” said Fratantoni. “Tight inventories remain a constraint on the pace of sales, but it is good to see more supply coming onto the market.”

Still, Yun continued to call for more construction to push the market toward a healthier equilibrium.

“More new homes need to be built,” he said. “Otherwise, we risk worsening the housing shortage, and an increasingly number of middle-class families will be unable to achieve homeownership.”


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