Is the real estate market on a downward spiral? Existing-home sales decreased for a fourth straight month in May, according to the National Association of Realtors. Only one major U.S. region recorded a month-over-month increase, while the other three regions saw sales decline. However, each of the four areas again registered double-digit year-over-year gains.
“Home sales fell moderately in May and are now approaching pre-pandemic activity,” said Lawrence Yun, NAR’s chief economist in the news release. “Lack of inventory continues to be the overwhelming factor holding back home sales, but falling affordability is simply squeezing some first-time buyers out of the market.
“The market’s outlook, however, is encouraging,” Yun continued. “Supply is expected to improve, which will give buyers more options and help tamp down record-high asking prices for existing homes.”
The median existing-home price2 for all housing types in May was $350,300, up 23.6% from May 2020 ($283,500), as every region registered price increases. This is a record high and marks 111 straight months of year-over-year gains since March 2012.
Total housing inventory3 at the end of May amounted to 1.23 million units, up 7.0% from April’s inventory and down 20.6% from one year ago (1.55 million). Unsold inventory sits at a 2.5-month supply at the present sales pace, marginally up from April’s 2.4-month supply but down from 4.6-months in May 2020.
Properties typically remained on the market for 17 days in May, unchanged from April and down from 26 days in May 2020. Eighty-nine percent of the homes sold in May 2021 were on the market for less than a month.
First-time buyers were responsible for 31% of sales in May, also even with April but down from 34% in May 2020. NAR’s 2020 Profile of Home Buyers and Sellers – released in late 20204 – revealed that the annual share of first-time buyers was 31%.
Individual investors or second-home buyers, who account for many cash sales, purchased 17% of homes in May, even with April and up from 14% in May 2020. All-cash sales accounted for 23% of transactions in May, down from 25% in April and up from 17% in May 2020.
A new study released by NAR – the 2021 Vacation Home Counties Report – found that from January to April 2021, the share of vacation home sales to total existing-home sales rose to 6.7%. Vacation home sales jumped 57.2% year-over-year compared to the 20% year-over-year growth in total existing-home sales.
“The appeal of vacation homes has certainly grown during the pandemic, especially among employees permitted to work from home,” Yun said. “As businesses decide new guidelines for remote workers, even allowing permanent remote options in some cases, look for vacation homes to remain a popular option.”
Distressed sales5 – foreclosures and short sales – represented less than 1% of sales in May, equal to April’s percentage but down from 3% in May 2020.
According to Freddie Mac, the average commitment rate(link is external) for a 30-year, conventional, fixed-rate mortgage was 2.96% in May, down from 3.06% in April. The average commitment rate across all of 2020 was 3.11%. Yun expects the 30-year fixed-rate mortgage to remain below 3.5% in 2021.
Single-family and Condo/Co-op Sales
Single-family home sales dropped to a seasonally-adjusted annual rate of 5.08 million in May, down 1.0% from 5.13 million in April, and up 39.2% from one year ago. The median existing single-family home price was $356,600 in May, up 24.4% from May 2020.
Existing condominium and co-op sales were recorded at a seasonally-adjusted annual rate of 720,000 units in May, unchanged from April but up 100.0% from one year ago. The median existing condo price was $306,000 in May, an annual increase of 21.5%.
“As outlined in last week’s NAR/Rosen Consulting Group report, we continue to face a dire shortage of available housing in this country,” said NAR President Charlie Oppler, a Realtor® from Franklin Lakes, N.J., and the CEO of Prominent Properties Sotheby’s International Realty. “NAR continues its advocacy efforts to find new, creative, and effective ways to increase housing construction and supply.
“The right policies will provide huge benefits to our nation’s economy, and our work to close this gap will be particularly impactful for lower-income households, households of color, and first-time buyers.”
For the second straight month, only the Midwest experienced higher sales from the prior month.
Existing-home sales in the Northeast decreased 1.4% in May, but the annual rate of 720,000 is a 46.9% jump from a year ago. The median price in the Northeast was $384,300, up 17.1% from May 2020.
Existing-home sales in the Midwest rose 1.6% to an annual rate of 1,310,000 in May, a 27.2% increase from a year ago. The median price in the Midwest was $268,500, an 18.1% increase from May 2020.
Existing-home sales in the South declined 0.4%, posting an annual rate of 2,590,000 in May, up 47.2% from the same time one year ago. The median price in the South was $299,400, a 22.6% jump from one year ago.
Existing-home sales in the West fell 4.1%, recording an annual rate of 1,180,000 in May, a 61.6% climb from a year ago. The median price in the West was $505,600, up 24.3% from May 2020.
1 Existing home sales, which include single-family, townhomes, condominiums, and co-ops, are based on transaction closings from Multiple Listing Services. Changes in sales trends outside of MLSs are not captured in the monthly series. NAR rebenchmarks home sales periodically using other sources to assess overall home sales trends, including sales not reported by MLSs.
Existing home sales, based on closings, differ from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing home sales, which account for more than 90% of total home sales, are based on a much larger data sample – about 40% of multiple listing service data each month – and typically are not subject to large prior-month revisions.
The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.
Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when the monthly collection of condo data began. Before this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales before 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.
2 The median price is where half sold for more and half sold for less; medians are more typical of market conditions than average prices, which are skewed higher by a relatively small share of upper-end transactions. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if additional data is received.
The national median condo/co-op price often is higher than the median single-family home price because condos are concentrated in higher-cost housing markets. However, in a given area, single-family homes typically sell for more than condos as seen in NAR’s quarterly metro area price reports.
3 Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982 (before 1999, single-family sales accounted for more than 90% of transactions, and condos were measured only on a quarterly basis).
4 Survey results represent owner-occupants and differ from separately reported monthly findings from NAR’s Realtors® Confidence Index, which includes all types of buyers. Investors are under-represented in the annual study because survey questionnaires are mailed to the addresses of the property purchased and generally are not returned by absentee owners. Results include both new and existing homes.
5 Distressed sales (foreclosures and short sales), days on market, first-time buyers, all-cash transactions, and investors are from a monthly survey for the NAR’s Realtors® Confidence Index, posted at nar.realtor.