Existing-Home Sales Constrained by Tight Supply in May, Prices Continue to Gain
(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 RealtorsÂ®.
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.
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.
"RealtorsÂ® 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
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
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 RealtorsÂ®, "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