Northeast Home Sales in May Buck National Trend

John Jordan | June 2018

WASHINGTON — U.S. existing-home sales fell for the second straight month in May, as only the Northeast region saw an uptick in activity, according to a report released on Wednesday by the National Association of Realtors.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, decreased 0.4% to a seasonally adjusted annual rate of 5.43 million in May from a downwardly revised 5.45 million in April. With last month’s decline, sales are now 3.0% below a year ago and have fallen year-over-year for three straight months.

Lawrence Yun, chief economist of the National Association of Realtors.
Photo Credit NAR

Lawrence Yun, NAR chief economist, says a solid economy and job market should be generating a much stronger sales pace than what has been seen so far this year. “Closings were down in a majority of the country last month and declined on an annual basis in each major region,” he 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.”

The Northeast led all regions in May posting a 4.6% increase in existing home sales to an annual rate of 680,000, although the total was 11.7% below a year ago. The median sale price in the Northeast was $275,900, which was down 1.8% from May 2017. In the Midwest, existing-home sales declined 2.3% to an annual rate of 1.26 million in May, and were 2.3% below a year ago. The median price in the Midwest was $209,900, up 4.2% from a year ago. Existing-home sales in the South declined 0.4% to an annual rate of 2.32 million in May, unchanged from a year ago. The median price in the South was $233,100, up 4.5% from a year ago.

The median existing-home price for all housing types in May was $264,800, an all-time high and up 4.9% from May 2017 ($252,500). May’s price increase marks the 75th straight month of year-over-year gains.

Total housing inventory at the end of May climbed 2.8% to 1.85 million existing homes available for sale, but was still 6.1% lower than a year ago (1.97 million) and has fallen year-over-year for 36 consecutive months. Unsold inventory was at a 4.1-month supply at the current sales pace (4.2 months a year ago).

Properties typically stayed on the market for 26 days in May, unchanged from April and down from 27 days a year ago. Fifty-eight percent of homes sold in May were on the market for less than a month.

“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,” added Yun. “That is why home prices keep outpacing incomes and listings are going under contract in less than a month—and much faster—in many parts of the country.”

Realtor.com’s Market Hotness Index, measuring time-on-the-market data and listings views per property, revealed that the hottest metro areas in May were Midland, TX; Boston-Cambridge-Newton, MA; San Francisco-Oakland-Hayward, CA; Columbus, OH and Vallejo-Fairfield, CA.

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage increased for the seventh straight month to 4.59% in May (highest since 4.64% in May 2011) from 4.47% in April. The average commitment rate for all of 2017 was 3.99%.

“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,” said Yun.

First-time buyers were 31% of sales in May, which was down from 33% both last month and a year ago. NAR’s 2017 Profile of Home Buyers and Sellers—released in late 2017—revealed that the annual share of first-time buyers was 34%.

National Association of Realtors’ President Elizabeth Mendenhall

“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,” said NAR President Elizabeth Mendenhall, a sixth-generation Realtor from Columbia, MO and CEO of RE/MAX Boone Realty. “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.”

All-cash sales were 21% of transactions in May, which was unchanged from April and down from 22% a year ago. Individual investors, who account for many cash sales, purchased 15% of homes in May, unchanged from last month and down from 16% a year ago.

Distressed sales—foreclosures and short sales—were 3% of sales in May (lowest since NAR began tracking in October 2008), down from 4% last month and 5% a year ago. Two percent of May sales were foreclosures and 1% were short sales.

Single-Family and Condo/Co-op Sales

Single-family home sales declined 0.6% to a seasonally adjusted annual rate of 4.81 million in May from 4.84 million in April, and were 3.0% below the 4.96 million sales pace a year ago. The median existing single-family home price was $267,500 in May, up 5.2% from May 2017.

Existing condominium and co-op sales increased 1.6% to a seasonally adjusted annual rate of 620,000 units in May, but were still 3.1% below a year ago. The median existing condo price was $244,100 in May, which was 2.5% above a year ago.

John Jordan
Editor, Real Estate In-Depth