Existing Home Sales May 2015

Sale of existing homes jumped in May according to the National Association of Realtors.  After selling 5.09 million units in April (upwardly revised from 5.04 million), the pace increased 5.1 percent to 5.35 million sales at a seasonally adjusted annualized rate.  Year-over-year, the pace of sales increased for the ninth consecutive month and were 9.2 percent higher than in May 2014.

Sales improved in all four sections of the nation.  In the Northeast, transactions jumped 11.3 percent in the period; the year-over-year tally happens to be the same in this section of the country.  Midwest sales rose 4.1 percent and are up 12.4 percent from a year earlier.  Sales in the South, the largest section of the nation, were 4.3 percent and represented 41percent of all sales in the period.  Finally, transactions in the West also improved 4.3 percent in the period and have grown 6.9 percent since May of last year.

The composition of buyers has changed dramatically in the past year.  First-time buyers represented a larger number of transactions versus a year earlier.  The same cannot be said about homes purchased for cash or sales to investors.  Also, distressed sales represented a smaller percentage of overall transaction versus May of 2014.

Price measures are inching ever closer to peak levels reached before the financial crisis.  Excluding seasonal adjustments, the average price for a new home was $272,800 in May versus the peak of $276,200 in June 2007.  The median price now sits at $228,700 and has been higher on a year-over-year basis for 39 consecutive months; it is now just $1,700 away from the July 2006 peak for this central tendency measure.

Rising interest rates did not keep this segment of the economy from improving.  According to Freddie Mac, the average commitment rate for a 30-year fixed-rate mortgage climbed to 3.84 percent from just 3.67 percent in April.   While the cost of money was higher, it remained below 4.0 percent for the sixth consecutive month.

Inventory measures were mixed.  On an absolute basis, there are more homes on the market than in April.  An increase of 3.2 percent puts the number of homes on the market at 2.29 million; this is 1.8 percent higher than a year ago.  However, on a relative basis, the inventory fell.  If sales continued at the most recent pace and no other homes were put on the market, the entire stock of homes would be gone in just 5.1 months, down from 5.2 months in April.  This is substantially lower than the levels seen during and immediately after the financial crisis, but is roughly in line with pre-crisis levels.

Housing continues its road to recovery.  On its own, existing home sales do not add to our nation’s output because they are a used product.  However, many forms of ancillary output are associated with this market place, so its continued improvement suggests to Atlas that the current expansion is on a firm foundation and is likely to continue.     (by C. Cox)