Existing-home sales fall for the fourth straight month, but show strong year-over-year gains
Existing home sales once again fell for the fourth straight month, but the news wasn’t all bad. The Midwest region exhibited a modest uptick in existing sales from April while the number of homes sold throughout the country was up last month by double digits compared to May 2020.
While total existing home sales (single-family, townhomes, condominiums and co-ops) declined 0.9% from April to a seasonally adjusted 5.8 million in May, national home sales registered a healthy 44.6% gain from a year ago. All of this begs the question: Are we in the midst of a slow yet stubborn decline in home sales or are the market conditions around supply and demand about to change?
Inventory and affordability take their toll but help is on the way
In the latest housing report from the National Association of Realtors (NAR), chief economist Lawrence Yun identifies two primary factors responsible for the recent dip. “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.”
While Yun notes that the declines are merely bringing home sales back to pre-pandemic levels, he also retains some optimism for the months ahead. “Supply is expected to improve, which will give buyers more options and help tamp down record-high asking prices for existing homes."
To that last point, total housing inventory for May totaled 1.23 million units—a rise of 7% from the previous month yet down 20% from May 2020. Properties typically remained on the market for 17 days in May, a number virtually unchanged from April and down from 26 days a year ago. Close to 90% of homes in May 2021 were on the market for less than 30 days.
Cause and effect: low inventory = increased home prices
While there are many forces contributing to the current housing environment, the most salient is unquestionably lack of inventory. This, in turn, has a pronounced effect in increasing home prices across the country. In fact, a record year-over-year increase in median existing home price of 23.6% was registered in May.
All four regions saw median home prices rise on an annual basis from May 2020. Let’s take a closer look:
- Northeast: $384,300—up 17.1% from last year
- Midwest: $268,500—up 18.1% from last year
- South: $299,400—up 22.6% from last year
- West: $505,600—up 24.3% from last year
While the numbers are not surprising (May marks the 111th straight month of year-over-year increases in median existing home price for all housing types), there is renewed urgency to get to the root of the problem.
"We continue to face a dire shortage of available housing in this country," said NAR President Charlie Oppler. "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."
Existing home sales for May 2021
While only the Midwest saw monthly gains in May, housing sales were up in all four regions on a year-over-year basis.
- Northeast: down 1.4% to an annual rate of 720,000—46.9% higher than last year
- Midwest: up 1.6% to an annual rate of 1,310,000—27.2% higher than last year
- South: down 0.4% to an annual rate of 2,590,000—47.2% higher than last year
- West: down 4.1% to an annual rate of 1,180,000—61.6% higher than last year
While the nation continues to adapt to a post-pandemic environment, in the weeks and months to come industry watchers will no doubt be examining interest rates, potential signs of inflation and the continuing housing shortage to determine the health—and the optimism—of the 2021 housing market.