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US May existing and new home sales both came out much lower than expected. It shouldn't be that big a surprise given just how much prices have risen and how many people have been financially crippled by the COVID lockdown. Low inventory also frustrated potential buyers.

 Home Sale

  • The median existing house price accelerated a record 23.6% from a year ago to an all-time high of $350,300 in May
  • The median new home sales price increased to $374,400 from $317,100 a year earlier in May.

U.S. home sales fell for a fourth straight month in May as record-high prices amid low inventory frustrated potential buyers, a trend that could persist for a while, with builders unable to deliver more houses because of expensive lumber.  Sales are nearing pre-pandemic levels, indicating that the tailwind from the virus is diminishing. shortage of available homes are beginning to hinder would-be homebuyers,

US New Home Sales for May 2021:

  • US May new home sales 769K vs 865K expected, or down 5.9 percent month-over-month 
  • It is the lowest reading in a year as high prices due to rising material costs weigh on buyers' affordability.
  • Sales sank 14.5% in the South and were flat in the Midwest.
  • In contrast, increases were seen in the Northeast (33.3%) and the West (6.7%).
  • The median sales price increased to $374,400 from $317,100 a year earlier.
  • There were 330 thousand new home sales available on the market, higher than 315 thousand in April.

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US Existing Home Sales for May 2021:

  • Existing home sales dropped 0.9% to a seasonally adjusted annual rate of 5.80 million units last month. Economists polled by Reuters had forecast sales would fall to a rate of 5.72 million units in May.
  • Existing home sales fell 0.9% in May
  • Single-family home sales, the largest segment of the housing market, dropped 1.0% to a pace of 5.08 million units, the lowest since last June.
  • Sales of multi-family homes were unchanged, though they continue to rebound as more people return to cities. 
  • Median house price surges 23.6% from year ago The median existing house price accelerated a record 23.6% from a year ago to an all-time high of $350,300 in May, with sales remaining skewed towards bigger and more expensive homes.
  • Sales fell in the Northeast, West and the densely populated South. However, rose in the Midwest, which is generally considered as having more affordable homes.
  • Housing inventory drops 20.6% from year ago

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Home resales account for the bulk of U.S. home sales, surged 44.6% on a year-on-year basis. However the annual increase is distorted by the plunge in sales in May 2020, when the economy was reeling from mandatory shutdowns of non-essential businesses to slow the first wave of COVID-19 cases.

Single-family home sales, the largest segment of the housing market, dropped 1.0% to a pace of 5.08 million units, the lowest since last June. Sales of multi-family homes were unchanged, though they continue to rebound as more people return to cities. The decline in sales reported by the National Association of Realtors on Tuesday was concentrated in the single-family housing segment, which benefited from a migration from cities as millions of Americans sought more spacious accommodations for home offices and schooling during the COVID-19 pandemic.

Housing Supply Constraints

Housing supply was already tight before the pandemic. With the public health situation brightening, there is cautious optimism that inventory will improve. Some homeowners were reluctant to list their homes because of fear of contracting the virus from potential buyers touring their properties. Some elderly Americans likely delayed downsizing due to the pandemic.

At May's sales pace, it would take 2.5 months to exhaust the current inventory, down from 4.6 months a year ago. A six-to-seven-month supply is viewed as a healthy balance between supply and demand. Properties typically remained on the market for only 17 days in May, down from 26 days a year ago.

There are widespread bidding wars, with institutional buyers reported to be outbidding other buyers.

First-time buyers accounted for 31% of sales in May, down from 34% a year ago. All-cash sales made up 23% of transactions, up from 17% last May. Economists are also hopeful that higher prices will entice some owners to put their homes on the market.

There were 1.23 million previously owned homes available for sale in May, up 7.0% from April and down 20.6% from one year ago. While the monthly improvement in inventory is welcome, the supply gap could take a long time to close.

The big question is after the lockdown eases and the economy reopens how much further can housing starts go with the massive disruption and divergence with unemployment and wealth creation and erosion demographics.

Source: US Census National Association of Realtors

From The TradersCommunity News Desk

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