An improvement is an improvement, no matter how small, and that is the case with May’s existing-home sales numbers from the National Association of Realtors (NAR) as sales increased by 0.2% to a seasonally adjusted annual rate of 4.3 million units.
However, May’s gain is on a month-to-month basis—year-over-year existing-home sales are down by a massive 20.4%.
Among the four major regions of the country, sales were mixed; the South and West posted improving numbers while the Northeast and Midwest reported sales declines. On a yearly basis, sales decreased in all four regions.
According to the NAR, total existing-home sales numbers include completed transactions for single-family homes, townhomes, condominiums, and co-ops.
"Mortgage rates heavily influence the direction of home sales," said NAR Chief Economist Lawrence Yun. "Relatively steady rates have led to several consecutive months of consistent home sales."
Total for-sale housing inventory at the end of May rose to 1.08 million units, or 3.8%, from April—but on a yearly basis, this number is down 6.1% from one year ago when inventory stood at 1.15 million units. At the current sales pace, that is a three month supply, up from 2.9 months in April and 2.6 months year-over-year.
"Available inventory strongly impacts home sales, too," Yun added. "Newly constructed homes are selling at a pace reminiscent of pre-pandemic times because of abundant inventory in that sector. However, existing-home sales activity is down sizably due to the current supply being roughly half the level of 2019."
Looking nationally at the big picture, the median existing-home sales price for all types of housing declined 3.1% year-over-year from $408,600 in May 2022 to $396,100 this May. Prices grew in the Northeast and Midwest but fell in the South and West.
The typical time a home remained on the market in May was 18 days, down from 22 days in April, but up from 16 days over the same period last year. Seventy-four percent of homes sold in May were on the market for less than a month.
An important segment of the market, first time buyers, were responsible for 28% of sales in May, down 1% from April, but up from 27% last year. All-cash sales accounted for 25% of transactions in May, down 3% from April; year-over-year this number was unchanged.
Individual investors or second-home buyers, who make up many cash sales, purchased 15% of homes in May, down from 17% in April and 16% the previous year.
Distressed sales—foreclosures and short sales—represented 2% of sales in May, virtually unchanged from last month and the prior year.
Looking specifically at single-family and condo/co-op sales, this number dipped to a seasonally adjusted annual rate of 3.85 million in May, down 0.3% from April and 20% year-over-year. The median existing single-family home price was $401,100 in May, down 3.4% from May 2022. Condo and co-op sales posted a seasonally adjusted annual rate of 450,000 units in May, up 4.7% from last month, but down 23.7% year-over-year. The median existing condo price was $353,000 in May, nearly identical to the prior year ($353,100).
"A temporary capital gains tax reduction on a sale of investment property can lead to a boost in housing inventory, home sales and the economy," said NAR President Kenny Parcell, a Realtor from Spanish Fork, Utah, and broker-owner of Equity Real Estate Utah. "Policymakers need to seriously consider the measure."
Looking at the data on a regional basis according to the NAR:
- Existing-home sales in the Northeast declined 2.0% from April to an annual rate of 500,000 in May, down 25.4% from May 2022. The median price in the Northeast was $439,000, up 2.5% from one year ago.
- In the Midwest, existing-home sales faded 2.9% from one month ago to an annual rate of 990,000 in May, decreasing 20.8% from the previous year. The median price in the Midwest was $298,000, up 1.1% from May 2022.
- Existing-home sales in the South expanded 1.5% from April to an annual rate of 2.02 million in May, sliding 16.5% from the prior year. The median price in the South was $361,400, down 2.7% from May 2022.
- In the West, existing-home sales rose 2.6% from the previous month to an annual rate of 790,000 in May, down 25.5% from one year ago. The median price in the West was $596,500, down 5.7% from May 2022.
“Sales of existing homes steadied in May, increasing 0.2% to a pace of 4.30 million as gains in the South and West offset mild declines in the Northeast and Midwest. The pace of home sales continues to exceed the 4 million sales low reached in January, yet it still lags year ago sales by a considerable 20.4%.”
“Mortgage rates in April were relatively steady, and the median home sale price continued to decline modestly, dropping 3.1% from May 2022. This gave buyers time to shop without fear of having to reset their housing budgets while on the hunt. Nevertheless, nearly 4 in 5 (78%) home shoppers surveyed this spring thought it at least somewhat likely that they would be priced out of the housing market if home prices and rates continue to rise.”
“A dearth of newly listed homes has made it challenging for buyers to find a good match if their criteria are too specific. Although total inventory in May was up 3.8% from April, it was down 6.1% from one year ago, and the number of newly listed homes fell 22.7% behind last May. Nevertheless, a market rendered slightly less competitive amid high costs is opening doors for some buyers. The first-time buyer share dipped from April, but was up to 28% in May from 27% one year ago.”
“With fewer homeowners poised to become sellers in 2023, buyers have a tough road ahead. Our revised 2023 outlook expects that there will be some positives, namely, a gradual decline in mortgage rates beginning midyear and a continued softness in home prices that will start to stabilize high housing costs. On net home sales are expected to tally roughly 4.2 million in 2023, their lowest annual total since 2012.”