Existing home sales fell 3.4 percent in May, at a seasonally consistent annual rate of 5.41 million. It has dropped sales momentum to its lowest level since June 2020 after the fourth consecutive monthly fall and the lockdown recession (see first chart). Sales are down 7.6 percent from a year ago.
Existing single-family home market sales, which accounted for about 89 percent of total existing home sales, fell 3.6 percent in May, reaching a seasonally consistent annual rate of 4.80 million (see first chart). Compared to a year ago, sales fell 7.7 percent. Single-family sales also fell for the fourth month in a row and were at their lowest level since June 2020.
In the single-family segment, sales declined in three of the four regions. Sales fell 6.0 percent in the west, 5.7 percent in the midwest and 2.7 percent in the south, the largest in terms of volume, while sales rose 1.8 in the north-east, the smallest in terms of volume. As measured a year ago, sales declined in four regions (-10.5 percent in the west, -9.5 percent in the northeast, -7.2 percent in the midwest, and -6.2 percent in the south).
Condo and co-op sales fell 1.6 percent for the month, dropping sales at an annual rate of 620,000 vs. 620,000 in April (see first chart). A year ago, condo and co-op sales were down 15.3 percent and were at their lowest pace since July 2020.
Condo and co-op sales were lower in one region in May, down 3.4 percent in the south and unchanged in the other three regions. Since a year ago, sales have declined in four regions (-22.6 percent in the south, -11.1 percent in the Midwest, -8.3 percent in the Northeast, and -6.7 percent in the West).
Total inventory of existing homes for sale rose 12.6 percent to 1.16 million in May, with monthly supplies (12 divided by annual sales rate) dropping 0.4 months to 2.6, the highest but still lower historical comparison since August 2021.
For the single-family segment, inventory grew 13.2 percent to 1.03 million per month (see second chart) but 1.0 percent lower than the May 2021 level. Monthly supply was 2.6, up from 2.2 in the previous month, the highest since September 2020 (see third chart).
Condo and co-op inventory rose 7.3 percent to 132,000 (see second chart), pushing the month’s supply from 2.4 to 2.6 in April. Monthly supply is still 10.3 percent below May 2021 but has risen for four consecutive months (see Chart 3).
The median selling price of an existing home in May was $ 407,600, up 14.8 percent from a year earlier. For the sale of existing single-family homes in May, the price was $ 414,200, a 14.6 percent increase over last year and a record high (see Chart 4). The median price of a condo / co-op was $ 355,700, 14.8 percent above May 2021 and a record high. At the same time, mortgage rates have risen recently, reaching 5.78 percent in mid-June (see Chart 4).
The combination of record-high home prices and sharply high mortgage rates has reduced housing purchasing power. The Housing Affordability Index of the National Association of Realtors measures whether an average household can qualify for a mortgage loan on an ordinary home. A typical home is defined as the national middle-value, existing single-family home, calculated by the NAR. The average family is defined as a middle-income earner, according to a report by the U.S. Bureau of the Census. A value of 100 means that a family with a middle income has enough income to qualify for a mortgage on a middle-class home. An index above 100 indicates that a middle-income household holds a 20% down payment, more than enough income to qualify for a mid-value home mortgage loan. As of April, the index stands at 109.2, the lowest since July 2007 (see Fifth Chart).
Housing could be under intense pressure as record-high prices and the recent rise in mortgage rates reduce purchasing power and push more buyers out of the market.
Robert Hughes
Robert Hughes joined AIER in 2013 for over 25 years researching economic and financial markets on Wall Street. Bob previously headed Brown Brothers Harriman’s Global Equity Strategy, where he developed an equity investment strategy that combines top-down macro analysis with bottom-up fundamentals.
Prior to BBH, Bob was a senior equity strategist at State Street Global Markets, a senior economic strategist at Prudential Equity Group, and a senior economist at Citicorp Investment Services and a financial markets analyst. Bob holds an MA in Economics from Fordham University and a BS in Business from Lehigh University.