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Existing Home Sales Constrained by Tight Supply, Prices Continue to Gain
Updated: Tuesday, June 26, 2012 - 12:10 PM
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 sales, 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, says 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
adds. 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 supply 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
says.
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 explains.
Distressed homes- 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 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 says.
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 says.
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 explains.
