U.S. Existing Home Sales in May were at a seasonally adjusted annual rate of 5.62M units – I had forecast 5.52M – up 1.1% from a downwardly revised 5.56M (from 5.57M) in April and up 2.7% from a year ago.
Total housing inventory for sale rose 2.1% in May to 1.96M but that is still 8.4% lower than a year ago, marking the 24th consecutive year-over-year decline.
The median existing-home price for all housing types increased 5.8% to $252,800, which was the 63rd straight month of year-over-year gains and the highest median sales price on record. The median price for existing single-family homes rose 6.0% to $254,600.
Based on the May sales pace, the inventory of unsold homes is at a 4.2-month supply versus 4.7 months a year ago. A 6.0-month supply is typically associated with a more balanced market.
Existing home sales were up in every major region in May except the Midwest (-5.9%). Sales were up 6.8% in the Northeast, up 2.2% in the South, and up 3.4% in the West.
The median number of days a home was on the market fell to 27 days, down from 29 days in April and down from 32 days a year ago. That is the shortest timeframe since tracking for that metric began in May 2011.
The takeaway from the report remains the same: existing home sales are being impeded by a lack of affordable supply, particularly in the lower- and mid-market price ranges.
The FHFA Housing Price Index rose by 0.7% on April – I had forecast a more modest increase of 0.4% – and the previous month’s reported 0.6% increase was revised upward to reflect a 0.7% increase in home prices.
Over the year, the HPI shows that home sales prices have risen 6.8%. Broken down by U.S. Census Division, the Mountain region (Montana, Idaho, Wyoming, Nevada, Utah, Colorado, Arizona, New Mexico) experienced the biggest annual jump in home prices, with a rise of 8.9% over April 2016. At No. 2 for largest 12-month price increases was the South Atlantic region, which experienced an 8% uptick over the year. This division includes Delaware, Maryland, the District of Columbia, Virginia, West Virginia, North Carolina, South Carolina, Georgia, and Florida.
Prices have steadily risen year-over-year in most Census divisions with the exception of the Pacific region, which includes Hawaii, Alaska, Washington, Oregon, and California. Home prices in this area rose 8.9% from 2015 to 2016 but just 7.5% from 2016 to 2017.
The takeaway here is that the compound annual growth rate since 1991 has been 3.5%; however, since January 2012, it has nearly doubled to an annual rate of 6.2%.
U.S. New Home Sales in May ran at a seasonally adjusted annual rate of 610,000 which was above my forecast for 599,000 units, up 2.9% from an upwardly revised 593,000 (from 569,000) in April and up 8.9% from the same period a year ago.
The median price of a new home sold surged 16.8% year-over-year to a record high of $345,800 and the average sales price rose by an equally impressive 16.1% to $406,400.
New homes priced at $399,999 or less accounted for 66% of the homes sold in May versus 70% in April, underscoring supply constraints at the lower end of the market.
The sales gains in May were not broad based. The Northeast and the Midwest saw single-family sales decline 10.8% and 25.8%, respectively, while the South and the West — the two largest regions for new home sales — saw single-family sales increase 6.2% and 13.3%, respectively.
The takeaway from the report is that affordability constraints driven by rising median prices are going to continue to serve as a headwind for first-time buyers who are facing added supply constraints in the existing home market.
What to Watch for This Week
Consumer Confidence in May slipped to 117.9 but remains close to a 10-year high. Expect to see the June figure drop a little further to 116.7 as consumers’ view of the short-term economic outlook downshifts a little more.
The NAR Pending Home Sales Index dropped by 1.3% in April and the June figure should be an improvement with pending sales rising by 0.5%.
The third and final estimate for US GDP in Q1 is likely to show no change from the previously reported growth rate of 1.2%.
Income & Spending both rose by 0.4% in April and the May number should show incomes up by 0.3% and spending up by just 0.1%.
The final take on Consumer Sentiment in June will show a slight increase from the previously reported figure of 94.5. Expect to see it come in at 94.7.