Photo: © Skynesher - iStockphoto
Existing-home sales have been sluggish for most of the year, and the trend continued into May. For the second month in a row, existing-home sales were down; every region save the Northeast experienced declining sales activity. With 5.43 million homes sold in May, sales dropped three percent year over year.
Harder to Buy
The increase in mortgage rates this past spring contributed to the decline, as did a rise in existing-home prices, which reached an all-time high of $264,800. These two factors impacted housing affordability, leaving some buyers unable to enter the housing market. In addition, competition among entry-level listings intensified. The increase in competition for scarce listings and a decline in housing affordability led to a decline in the number of first-time buyers making purchases—this group accounted for only 31 percent of all market activity in May, down from 33 percent both a month ago and a year ago.
More Homes Desperately Needed
Despite the rise in mortgage rates and home prices, economists with the National Association of Realtors (NAR) believe the market should have been performing better due to the strength of the economy and the job market. According to Lawrence Yun, chief economist for the NAR, "Incredibly low supply continues to be the primary impediment to more sales." Evidence of the high level of buyer demand can be seen in how quickly homes are being sold. Of all the homes available for sale in May, 58 percent were sold in less than a month. Homes took an average of 26 days to sell, unchanged from a month earlier but down a day from May 2017. "Inventory coming onto the market during this year's spring buying season—as evidenced again by last month's weak reading—was not even close to being enough to satisfy demand," says Yun. As long as the market is saddled with a lack of inventory, home prices will continue to outstrip incomes and competition for homes will intensify, leaving many buyers priced out of the market.
Northeast - Existing-home sales annual rate of 680,000; an increase of 4.6 percent from April but a decrease of 11.7 percent from May 2017.
Midwest - Existing-home sales annual rate of 1.26 million; a decrease of 2.3 percent from both April and May 2017.
South - Existing-home sales annual rate of 2.32 million; a slight decrease of 0.4 percent from April but unchanged from May 2017.
West - Existing-home sales annual rate of 1.17 million; a decrease of 0.8 percent from April and 4.1 percent from May 2017.