Existing-Home Sales Fall 9.7% in May; NAR Expects Strong Rebound in Coming Months
Real Estate In-Depth | June 2020
WASHINGTON—Existing-home sales fell in May, marking a three-month decline in sales as a result of the coronavirus outbreak, according to the National Association of Realtors. Each of the four major regions witnessed dips in month-over-month and year-over-year sales, with the Northeast experiencing the greatest month-over-month drop at 13%.
Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, slumped 9.7% from April to a seasonally-adjusted annual rate of 3.91 million in May. Overall, sales fell year-over-year, down 26.6% from a year ago (5.33 million in May 2019).
“Sales completed in May reflect contract signings in March and April – during the strictest times of the pandemic lockdown and hence the cyclical low point,” said Lawrence Yun, NAR’s chief economist. “Home sales will surely rise in the upcoming months with the economy reopening, and could even surpass one-year-ago figures in the second half of the year.”
The median existing-home price for all housing types in May was $284,600, up 2.3% from May 2019 ($278,200), as prices increased in every region. May’s national price increase marks 99 straight months of year-over-year gains.
Total housing inventory at the end of May totaled 1.55 million units, up 6.2% from April, and down 18.8% from one year ago (1.91 million). Unsold inventory sits at a 4.8-month supply at the current sales pace, up from 4.0 months in April and up from the 4.3-month figure recorded in May 2019.
“New home construction needs to robustly ramp up in order to meet rising housing demand,” Yun said. “Otherwise, home prices will rise too fast and hinder first-time buyers, even at a time of record-low mortgage rates.”
Properties typically remained on the market for 26 days in May, seasonally down from 27 days in April, but equal to 26 days in May 2019. Fifty-eight percent of homes sold in May 2020 were on the market for less than a month.
First-time buyers were responsible for 34% of sales in May, down from 36% in April 2020 and up from 32% in May 2019. NAR’s 2019 Profile of Home Buyers and Sellers, which was released in late 2019, revealed that the annual share of first-time buyers was 33%.
Individual investors or second-home buyers, who account for many cash sales, purchased 14% of homes in May, up from 10% in April 2020 and from 13% in May 2019. All-cash sales accounted for 17% of transactions in May, up from 15% in April 2020 and down from 19% in May 2019.
Distressed sales—foreclosures and short sales—represented 3% of sales in May, about even with April but up from 2% in May 2019.
“Although the real estate industry faced some very challenging circumstances over the last several months, we’re seeing signs of improvement and growth, and I’m hopeful the worst is behind us,” said NAR President Vince Malta, broker at Malta & Co., Inc., in San Francisco. “NAR, along with our partners and 1.4 million members, are already working to reignite America’s real estate industry, which will be a key driver in our nation’s economic recovery.”
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage decreased to 3.23% in May, down from 3.31% in April. The average commitment rate across all of 2019 was 3.94%.
Single-family and Condo/Co-op Sales
Single-family home sales sat at a seasonally-adjusted annual rate of 3.57 million in May, down 9.4% from 3.94 million in April, and down 24.8% from one year ago. The median existing single-family home price was $287,700 in May, up 2.4% from May 2019.
Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 340,000 units in May, down 12.8% from April and down 41.4% from a year ago. The median existing condo price was $252,300 in May, a decrease of 1.6% from a year ago.
“Relatively better performance of single-family homes in relation to multifamily condominium properties clearly suggest migration from the city centers to the suburbs,” Yun said. “After witnessing several consecutive years of urban revival, the new trend looks to be in the suburbs as more companies allow greater flexibility to work from home.”
As was the case for the month prior, sales for May decreased in every region from the previous month’s levels. Median home prices grew in three of the four major regions from one year ago, falling marginally in the West.
May 2020 existing-home sales in the Northeast fell 13.0%, recording an annual rate of 470,000, a 29.9% decrease from a year ago. The median price in the Northeast was $327,900, up 7.8% from May 2019.
Existing-home sales decreased 10.0% in the Midwest to an annual rate of 990,000 in May, down 20.2% from a year ago. The median price in the Midwest was $227,400, a 3.0% increase from May 2019.
Existing-home sales in the South dropped 8.0% to an annual rate of 1.73 million in May, down 25.1% from the same time one year ago. The median price in the South was $247,400, a 2.1% increase from a year ago.
Existing-home sales in the West fell 11.1% to an annual rate of 720,000 in May, a 35.1% decline from a year ago. The median price in the West was $408,400, down 0.2% from May 2019.