Due to a relatively low supply of properties on the market, existinghome sales fell for the fourth month in a row in May.
According to the National Association of Realtors, existing homesales declined 0.9 percent in May from April to a seasonally adjusted annualizedrate of 5.8 million units. The 5.8 million rate is slightly higher than it was before the outbreak.
Sales were up 44.6 percent year over year, although the comparisonis heavily skewed due to the fact that the housing market was effectively shutdown for two months at the outset of the pandemic. Last summer, the market exploded, and it remained robust for the rest of the year.
“Sales are largely returning to pre-pandemic activity,” saidLawrence Yun, chief economist for the Realtors. “While a lack of inventorycontinues to be the most significant stumbling block to home sales, dropping affordability is simply driving some first-time buyers away.”
At the end of May, there were only 1.23 million properties for sale,down 20.6 percent from a year ago. That's a 212-month supply at the currentsales rate.
Due to a lack of product and great demand, prices have continued toskyrocket. In May, the median price of an existing home was $350,300, up 23.6percent from the same month in 2020. Not only is this the highest median price ever recorded, but it is also the biggest annual appreciation ever recorded.
The mix of sales, on the other hand, skews prices. The market hasshifted to the upper end, where there is a greater supply of availableproperties. For example, sales of properties priced between $100,000 and $250,00 down 2% year over year, while sales of homes priced between $750,000 and $1 million increased by 178 percent.
Except in the Midwest, where property prices are the lowest, salesfell in every region.
In April, when the majority of these contracts were signed, mortgagerates dropped dramatically. According to Mortgage News Daily, the average30-year fixed rate finished March at 3.45 percent, and by the rate of May, it was approaching 3%. This would have given purchasers more purchasing power, but the rate cut was clearly insufficient to counteract rapidly rising property prices.
According to the U.S. Census Bureau, sales of newly built homes fell6% in April compared to March, based on signed contracts rather than closings.Prices for those residences increased by almost 20% year over year.
“May's sales activity points to a potential moderation in growth forthe remainder of 2021,” said George Ratiu, senior economist at realtor.com.“With four consecutive monthly declines in existing home sales, May's sales activity points to a potential moderation in growth for the remainder of 2021,” he added. “With inflation impacting on consumer budgets and the Federal Reserve signaling that monetary easing may be curtailed sooner than expected, interest rates and high prices will put affordability at the forefront for buyers.”