Homebuyers snatched up a handful of properties listed in May, boosting sales for the month. But record low inventories continue to choke key segments of the housing market.
Sales of previously owned homes in May rose 0.2 percent from the previous month to an annual rate of 4.3 million, the National Association of Realtors (NAR) said Thursday. That’s down 20.4 percent from a year ago and exceeds the 4.25 million expected by economists, according to Bloomberg data.
Housing deficits remain a headwind in the housing market as fewer potential sellers want to list their homes in today’s high interest rate environment. The number of homes on the market increased in May, but the inventory count for that month was the lowest on record, the NAR said.
“Available inventory also has a significant impact on home sales,” NAR chief economist Lawrence Yun said in a statement. “New homes are selling at a rate reminiscent of pre-pandemic times due to the sector’s abundant inventory. Existing home sales activity has declined significantly, however, as current supply is about half of 2019 levels.”
The number of homes for sale in May stood at 1.08 million, up 3.8 per cent from April, but down 6.1 per cent from a year earlier, NAR reported. That was also lower than the pre-pandemic baseline of 1.9 million homes sold in the month of May, Yoon said on the call.
This is consistent with a separate report from Redfin, which found that the number of homes for sale in the US hit an all-time low in May, with inventories down 7.1% year over year to 1.4 million. This is the lowest number of homes on the market since 2012, when Redfin started tracking the data.
Rate-conscious homeowners are still reluctant to list their homes, and new listings fell 25.2 percent year-over-year in May, one of the steepest annual declines on record, Redfin found.
A low inventory environment kept competition among buyers steady. About 37.5% were sold above demand, down from last May, when more than half were sold at a premium. However, according to Redfin, that was still above pre-pandemic levels.
And, according to NAR, inventories were on the market for 18 days in May, up from 16 days a year ago but lower than the 22 days recorded in April. Nearly three-quarters of homes sold in May were on the market in less than a month.
Redfin real estate agent Rafael Corrales said, “Miami has a huge shortage of housing inventory, combined with high interest rates, making life very difficult for home buyers. Their money just doesn’t go that far.”
Mortgage rates have been a double-edged sword for buyers. Interest rates have reduced the ability to afford a home and discouraged homeowners, whose mortgage rates are well below normal rates, from listing their properties.
According to Freddie Mac, rates stayed below 6.5% for three weeks in May before moving higher in the final week. Last week, the average rate on a 30-year fixed-rate mortgage was 6.69%. Rates for this week are available at noon on Thursday.
Mr. Yoon said, “The mortgage rate has a great influence on the direction of home sales.”
By region, sales in the Northeast region fell 2.0% from the April figure to 500,000 units in May, down 25.4% from the same period last year. The median price in this region was $439,000, up 2.5% year over year.
Midwest home sales fell 2.9 per cent from a month ago to an annual rate of 990,000 units in May, down 20.8 per cent from the previous year. The median price in the Midwest was $298,000, up 1.1% from May 2022.
Sales in the southern region decreased 16.5% year over year to an annual rate of 2.02 million, up 1.5% from April. The median price in the South was $361,400, down 2.7% from the same period last year.
And in the Western Region, sales in May declined 25.5% year-over-year to 790,000 units, up 2.6% month-on-month. The median price in the Western Region was $596,500, down 5.7% from May 2022.
Individual investors or second home buyers, who make up the bulk of the cash sale, bought 15% of homes in May, up from 17% in April. Foreclosure notices and short sales accounted for 2% of sales in May, unchanged from last month and prior year.
Regarding the proportion of bad sales, Mr. Yoon said, “It is at a low level.” “House never stays too long.”
Dani Romero is a reporter for Yahoo Finance. follow her on her twitter @daniroromerotv
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