Existing Homes Sales Fall for the Fourth Consecutive Months As Lack of House Inventory Continues

Share on linkedin
Share on facebook
Share on twitter
Share on email
Share on whatsapp

Existing homes sales dipped in May, down 0.9% from the previous month of 5.85 million to about 5.8 million. According to the National Association of Realtors, this is the fourth consecutive month that sales of single-family, condos, apartments, and townhouses are falling.

The medium price for existing homes for all house types in May was $350,000, a 23.6% increase from the May 2020 price of $283,500. This is a record YoY profit since 2012, according to the National Association of Realtors.

Almost all the regions experienced month-over-month declines, but the Midwest experienced a fairly stable rise in existing home sales. The Midwest region recorded a 1.6% rise in home sales to a yearly rate of 1,310,000 in May, up 27.2% from a year ago. However, home sales in the Northeast, South, and West witnessed a 1.4%, 4%, and 4.1% decline month-over-month.

The fall of existing home sales in May can be attributed to overheated home prices caused by competition from buyers and the lack of inventory. According to NAR, total inventory rose 7% from April’s inventory to about 1.2 million units, although the total units are lower compared to 1.55 million units recorded a year ago. Currently, unsold home inventory is a 2.5-month supply, up from 2.4 month supply in April.

In May 2021, approximately 89% of the properties were sold for less than 30 days. Houses typically remained in the market for 17 days in May, same as April, but down 9 days in May 2020.

Lack of house inventory, overheated home prices, and low demand are the major factors that affect home sales, but the overheated home prices is a significant reason first-time homebuyers can’t afford a home. Undoubtedly, the 7% increase in housing inventory will help regulate home prices to an extent, but it won’t do much in helping first-time homebuyers get affordable homes.

According to the Associate Vice President of Economic and Industry Forecasting for the Mortgage Bankers Association, Joel Kan, first-time buyer share stands at 31%. This means that affordability remains a major hurdle for first-time homebuyers and the lower market. Adding that to the rapidly rising median home prices will knock first-time buyers off the market.

Despite the fall of existing home sales, activity in the real estate niche is slowly coming back to how they were at pre-pandemic levels. Real estate experts expect existing home sales to increase in the coming quarter of 2021 if supply increases, houses become listed more, and other factors are favorable. Currently, plans to build more homes are underway, and if completed, this will improve supply, give buyers more options, and cut down on the high asking prices of existing homes.

When the pandemic was at its peak, homeowners declined to enter the market to list their properties because of the risk of contracting the infection. They were afraid to sell or make any big moves, thus, withholding supply. With more home constructions underway and the Covid-19 vaccines already rolled out, listings will become more available and existing home sales will rise.

Visit The Power Is Now on Facebook Live and subscribe to our YouTube Channel for more interesting updates. Tune in Today!

Share on linkedin
Share on facebook
Share on twitter
Share on email
Share on whatsapp