RealEstateEconomyWatch.com Insight and Intelligence on Residential Real Estate
(June 23, 2009 Release)
Highlights
• Existing home sales rose 2.4 percent to 4.77 million in May. The annualized home sales in May is now 3.6 percent below its level from a year ago.
• May’s sales pace is slightly above its 3 month average of 4.66 million units.
• The Midwest and Northeast experienced a 9.0 percent and 3.9 perecent increase in sales, respectively; while the South experienced no change and the West reported a 0.9 percent drop in sales.
• It was reported that 33 percent of home sales were foreclosure and short sales in May, down from a 45 percent share in April.
• The median home price declined 16.8 percent from a year ago.
• The months’ supply of homes available for sale declined to 9.6 compared to 10.1 in April.
| Existing Home Sales (Mil, SAAR) | ||||
| May 09 | Apr 09 | 3 mo Avg | 1 year ago | |
| United States | 4.77 | 4.66 | 4.66 | 4.95 |
| % change | 2.4 | 2.4 | -3.6 | |
| Northeast | 0.80 | 0.77 | 0.75 | 0.89 |
| % change | 3.9 | 11.6 | -10.1 | |
| Midwest | 1.09 | 1.00 | 1.04 | 1.14 |
| % change | 9.0 | -2.0 | -4.4 | |
| South | 1.74 | 1.74 | 1.73 | 1.91 |
| % change | 0.0 | 1.7 | -8.9 | |
| West | 1.14 | 1.15 | 1.14 | 1.02 |
| % change | -0.9 | 1.8 | 11.7 | |
| Months’ Supply | 9.6 | 10.1 | 9.8 | 10.9 |
| Median Existing Home Prices (Ths, NSA) | ||||
| May 09 | Apr 09 | 3 mo Avg | 1 year ago | |
| United States | 173.0 | 166.6 | 169.8 | 207.9 |
| % change | 3.8 | -1.9 | -16.8 | |
| Northeast | 243.6 | 237.4 | 237.2 | 278.4 |
| % change | 2.6 | 2.9 | -12.7 | |
| Midwest | 145.8 | 138.8 | 141.1 | 162.7 |
| % change | 5.0 | 0.1 | -10.4 | |
| South | 157.4 | 147.9 | 150.7 | 174.6 |
| % change | 6.4 | 0.7 | -9.8 | |
| West | 197.7 | 204.2 | 209.8 | 285.0 |
| % change | -3.2 | -10.3 | -30.6 | |
Source: National Association of Realtors
Analysis
The 2.4 percent increase in existing home sales was as expected. The May sales pace was predicted by a relatively strong pending home sales report in the prior month. The 4.77 annualized pace of sales is now above its 3 month of 4.66 average, suggesting that existing home sales is steadily drifting upward from its cyclical low of 4.49 million unit pace set in January. However, from a longer term perspective, existing home sales seems to be going nowhere; hovering in the 4.5 to 4.9 million range over the past 12 months. This is disappointing news given that mortgage rates are near cyclical lows and mounting foreclosures are biasing the existing sales numbers upward. It is also clear that there are a meaningful number of appraisal valuations that differ from contract prices which are forcing lenders to deny mortgage applications. These is contributing to a historically high fallout ratio from pending contracts to closings.
Unexpectedly, the inventory of homes available for sale in May dropped considerably to 3.798 million compared to 3.937 million in April. An increasing number of households with children usually put their homes on the market during the Spring season (as the school session nears an end) so it is surprising to observe the inventory of homes for sale decline so dramatically in May. Because of this drop, the months supply fell to 9.6.
It is possible that we have seen the worst in the housing marketplace. There is likelihood that the housing correction may be nearing its end and bottoming out. There are some positive influences for the housing sector. Mortgage rates are hovering near historic lows and are expected to remain at these levels for the remainder of the year. The fiscal stimulus package promises to have a positive impact on consumer confidence and spending patterns. And the foreclosure mitigation programs are expected to slow the pace of foreclosures, exerting downward pressure on housing supply.
However, on the down side, the economy remains in a severe recession, shedding millions of jobs on a quarterly basis. Credit conditions also remain very tight, keeping households who want to purchase homes out of the purchase marketplace. And home values continue to fall as evidenced by the 16.8 percent drop in the median home price, year over year. On balance, it will take time for the housing sector to recover. It is possible that January’s home sales pace represents a cyclical bottom for today’s housing recession, but the pace of home sales are expected to remain weak for the remainder of this year.
