Existing Home Sales – Inventories are Declining
Sales of all existing homes increased 2.4% to an annual rate of 4.77 million units in May. A large part of the gains in sales was from multi-family units (+6.1%), with purchases of single-family units posting a 1.9% increase to an annual rate of 4.25 million units. Sales of existing single-family homes have risen in four of the last six months. According to the National Association of Realtors, 33% of the sales in May were distressed properties, down from 45% in April. The $8000 tax credit for first time home buyers has helped to reduce inventories of unsold homes.
The median price of an existing single-family home in May was $172,900, down 16.1% from a year ago. The largest year-to-year decline of the median price of a single-family home was 16.8% in April 2009. Additional price declines are virtually certain given the elevated level of inventories of unsold homes.
On a regional basis, sales of single-family existing homes rose in the Northeast (+5.2%) and Midwest (+8.6%) but fell in the South (-0.6%) and West (-1.9%). The median price of an existing home in the Northeast is 12.5% below a year ago, in the Midwest it has dropped 10.4%, in the South it has declined 9.9% and down a hefty 30.6% in the West. Sales of single-family existing homes fell 36% in January 2009 from the peak reading in September 2005. The May sales pace of existing single-family homes suggests a marginal recovery.
The historically low level of mortgage rates and the first-time home buyer tax credit are factors supporting a stronger recovery in the housing market in the near term. The 30-year fixed rate mortgage was 5.38% during the week ended June 19, down from a temporary hike to 5.59% in the prior week. The 30-year fixed rate mortgage averaged 4.83 in the April-May period.
