Existing home sales fell back for the second straight month in May, however, the Northeast was the only region to see an uptick, according to the latest report from the National Association of Realtors.
Total existing home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, decreased 0.4% to a seasonally adjusted annual rate of 5.45 million in April.
With last month’s decline, sales have fallen year-over-year for three straight months, now sitting 3% below 2017’s total.
“The abrupt hike in mortgage rates this spring, along with price appreciation and competition being the strongest in the entry-level part of the market, is why first-time buyers are not as active as they should be and their participation remains below its historical average,” NAR Chief Economist Lawrence Yun said.
The median existing home price for all housing types increased to $264,800 in May, an all-time high and up 4.9% from May last year. This marks the 75th straight month of year-over-year gains.
“Supply is woefully inadequate to meet demand, which is pushing prices ever higher and contributing to mounting affordability woes – especially at the bottom end of the market,” Zillow Senior Economist Aaron Terrazas said. “After rising slowly but consistently in the early years of the recovery, the number of existing home sales stalled in early 2016 at roughly 5.5 million annual sales, and has stayed on that low, dusty plateau ever since.”
Total housing inventory rose 2.8% at the end of May to 1.85 million existing homes available for sale, but is still 6.1% lower than last year’s 1.97 million. Unsold inventory rests at a 4.1-month supply at the current sales pace, down from 4.2 months last year.
“Closings were down in a majority of the country last month and declined on an annual basis in each major region,” Yun said. “Incredibly low supply continues to be the primary impediment to more sales, but there’s no question the combination of higher prices and mortgage rates are pinching the budgets of prospective buyers, and ultimately keeping some from reaching the market.”
NAR explained that as inventory decreases, homeowners are less likely to list their homes for sale, thus worsening the cycle.
“Realtors in many parts of the country say their seller clients are dealing with a seesaw of emotions when deciding to put their home on the market,” NAR President Elizabeth Mendenhall said. “While they’re thrilled that they will immediately find multiple buyers interested in their listing, many fear they’ll have extreme difficulty finding another home to buy. Some have even decided to hold off until inventory conditions start improving, which is actually only exacerbating supply shortages.”
Properties stayed on the market an average of 26 days in May, unchanged from April and down from 27 days in 2017.
“While this is the best economy in the last 20 years, many potential buyers have been sidelined and unable to purchase,” Freddie Mac Chief Economist Sam Khater said. “The more worrying concern is that relief is not coming anytime soon.”
“The inventory of unsold homes has shrunk for 36 consecutive months, even in the presence of much higher prices, which in past cycles typically led to more inventory being listed for sale,” Khater said. “The problem is not just related to construction, but many buyers from last decade who purchased their first home have not traded up. Therefore, renters trying to get on the housing ladder are stuck and unable to take their first step.”
Distressed sales, including foreclosures and short sales were 3% of sales in May, down from 4% last month and 5 % in 2017. This is the lowest since NAR began tracking in October 2008.
Single-family and condo/co-op sales in the Northeast increased 4.6% to an annual rate of 680,000 and are 11.7% below 2017. The median price in the Northeast was $275,900, which is down 1.8% from May 2017.