As you would expect, May marks the third consecutive month of home sales declines amidst a global pandemic. According to the National Association of Realtors (NAR), existing home sales fell 9.7% in May compared to April, down a whopping 26.6% compared to this time last year.
The silver lining is that values continue to improve, with a median existing home price of $284,600 nationally, up 2.3% from May 2019, marking the 99th month of year-over-year gains.
Inventory levels rose 6.2% from April, and are down 18.8% from May 2019. Average days on market didn’t move much, at 26 days being equal to May 2019, and down from 27 days in April.
“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 Dr. Lawrence Yun, NAR’s chief economist.
He added, “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.”
Sales also reflected an uptick in suburban sales over urban home sales. Dr. Yun cited work from home demands, however, anecdotally we would add some people moving away from densely populated areas in response to recent unrest.
What will ease housing conditions?
As he has observed repeatedly in recent years, Dr. Yun points to home builders. “New home construction needs to robustly ramp up in order to meet rising housing demand. Otherwise, home prices will rise too fast and hinder first-time buyers, even at a time of record-low mortgage rates.”
Mortgage Banker’s Association’s (MBA’s) SVP and Chief Economist, Dr. Mike Fratantoni’s insight pointed to inventory challenges as well: “As buyers are returning to the market, as evidenced by the strong, nine-week rebound in MBA’s purchase application data, the lack of homes for sale will be a real constraint. Although demand certainly dropped in March and April due to the crisis, supply dropped even more, and has thus far kept home prices from declining. We expect that home-price growth will pick up over the summer due to insufficient supply levels.”
Dr. Fratantoni noted, “The market is supported by strong demand from first-time homebuyers, who represented 34% of home purchases in May. Millennial-driven demand will be a tailwind for the market for the next several years.”
“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.