Home Economic Trends Existing-Home Sales Fall as Prices Continue to Rise – Robert Hughes (06/23/2021)

Existing-Home Sales Fall as Prices Continue to Rise – Robert Hughes (06/23/2021)

Sales of existing homes fell 0.9 percent in May, falling further below the recent peak of 6.73 million in October 2020. Sales came in at a 5.8 million seasonally adjusted annual rate, the fourth consecutive monthly decline and fifth in the last seven months (see first chart). Sales are still up 44.6 percent from a year ago.

Sales in the market for existing single-family homes, which account for about 88 percent of total existing-home sales, fell 1.0 percent in May, coming in at a 5.08 million seasonally adjusted annual rate. May was the fifth consecutive decline. From a year ago, sales are up 39.2 percent (see first chart).

Condo and co-op sales were unchanged for the month, leaving sales double the May 2020 pace. Sales came in at a 720,000 pace for the month versus 360,000 in May 2020 (see first chart).

The median sale price in May of an existing home was $350,300, 23.6 percent above the year ago price and a new record high. For single-family existing home sales in May, the price was $356,600, a 24.4 percent rise over the past year, while the median price for a condo/co-op was $306,000, 21.5 percent above May 2020 (see top of second chart).

The record-high prices are a key factor in slowing sales and are helping push up inventory. Total inventory of existing homes for sale rose 7.0 percent to 1.23 million in May, pushing the months’ supply (inventory times 12 divided by the annual selling rate) to 2.5, the highest since October 2020 though still a very low supply by historical measure.

For the single-family segment, inventory increased 7.1 percent to 1.05 million, the highest since November 2020. The months’ supply rose to 2.5, from 2.3 in April, while the condo and co-op inventory rose 4.2 percent to 175,000, putting months’ supply at 2.9 versus 2.8 in the prior month (see bottom of second chart). 

Rising prices are pushing some buyers out of the market, helping to slow sales and ease the tight inventory. Additionally, rising mortgage rates – up from December lows but down slightly over the last two months – and some fading of the rush out of dense urban areas for suburban housing or rural country homes may also be undermining housing demand. Housing is likely to be volatile over the coming months as fundamentals adjust to changing market conditions.