US: Existing Home Sales decline again but are still running at a very strong pace – Wells Fargo

Data released on Tuesday, showed a decline in Existing Home Sales in May to a 5.8 million unit (annual rate). Existing home sales have declined during each of the past four months but are still running at a very strong pace and modestly above their pre-pandemic level, explain analysts at Wells Fargo. They noted the median price of an existing home sold in May rose to $350,300, which is up an astounding 23.6% from the prior year. 

Key Quotes: 

“Existing home sales fell less than expected in May, with overall sales falling 0.9% to a 5.80 million-unit annual rate. The decline in sales was widely expected and follows a drop during each of the prior three months. Apparently, many potential home buyers are reassessing the immediacy of buying a first home or upgrading or downsizing from their current home. Like so many other areas of the post-pandemic economy, supply-side issues are the primary disruptive influence on the housing market, with the persistence of near record low inventories of existing homes contributing to the record run-up in home prices. Rising home prices cut both ways.”

“Data from both the University of Michigan and Conference Board show that plans to purchase a home fell sharply during May. While a pullback was expected, the magnitude of the drop was eye-opening and supports our thesis that the pandemic-driven tailwind home sales have enjoyed appears to be lessening. With much of the adult population vaccinated and fears of contracting COVID significantly diminished, workers are returning to the office or workplace sooner than had been expected. Moreover, much of the speculation about how many workers would work remotely indefinitely appear to have been greatly exaggerated. While there is little doubt the workplace will be more flexible going forward, most people that worked in an office prior to the pandemic will work in an office post-pandemic.”

“We will likely see some rebound in buying plans and existing home sales this summer, as the recent decline in mortgage rates attracts more buyers back into the market.”