May Existing Home Sales

The pace of existing home sales slowed in May according to the National Association of Realtors (NAR).  The pace of the seasonally adjusted annualized rate went from 4.62 million units in April to 4.55 million dwellings in May.  The month-over-month pace of sales has been trending lower most of this year.   On the bright side, sales of existing homes grew by 9.6 percent versus May of last year.  That makes May’s figure the 11th consecutive monthly improvement when comparing year-over-year statistics.  Since the annualized sales numbers are adjusted for seasonality, the warm winter and early spring sales figures may have been skewed higher if sales were pulled forward from later months (like from now until the end of the year).  This may not be fully evident until early next year when the year-over-year comparisons will be against this year’s warmer than normal first quarter.

Inventories have been trending down for the last 11 months, but they did tick up by one-tenth of a month in May.  At the current sales pace, the stock of used homes (approximately 2.49 million) will last 6.6 months.  The total number of existing homes on the market fell by an estimated 10,000.  The waning supply may be helping the median and average prices as they rose 5.1 percent and 4.4 percent respectively.  A downturn in the number of distressed sales may have also assisted the improving prices; such transactions can impede the average value since they may require large discounting by desperate sellers.  After making up 28 percent and 31 percent of the transactions in March and April respectively, foreclosures & short sales sold at deep discounts only accounted for 25 percent of the deals in May.

Despite the recent improvements, the housing market remains rather lifeless.  According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed rate mortgage fell to a new record low of 3.80 percent, but the sales pace remains relatively soft.  This becomes even more obvious when one considers that the “great recession” ended almost three years before the data for this NAR report was compiled.  Atlas sees the housing market as an area of the economy that is likely to continue having issues into the foreseeable future as financial institutions concentrate on shoring up their positions in order to protect their interests from the next economic downturn that may have already started worldwide.  The tone here at Atlas will remain cautious until we see a large portion of the economic data materially improve.  (by C. Cox)