NAR: Existing-Home Sales Decreased to 5.41 million SAAR in May

Inventory down 4.1% year-over-year

From the NAR: Existing-Home Sales Fell 3.4% in May; Median Sales Price Surpasses $400,000 for the First Time

Existing-home sales retreated for the fourth consecutive month in May, according to the National Association of Realtors®. Month-over-month sales declined in three out of four major U.S. regions, while year-over-year sales slipped in all four regions.

Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 3.4% from April to a seasonally adjusted annual rate of 5.41 million in May. Year-over-year, sales receded 8.6% (5.92 million in May 2021). ...

Total housing inventory registered at the end of May was 1,160,000 units, an increase of 12.6% from April and a 4.1% decline from the previous year (1.21 million). Unsold inventory sits at a 2.6-month supply at the current sales pace, up from 2.2 months in April and 2.5 months in May 2021.
emphasis added

The sales rate was close to the consensus forecast.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in May (5.41 million SAAR) were down 3.4% from the previous month and were 8.6% below the May 2021 sales rate. Sales in April were revised down.

Sales are back to pre-pandemic levels. An interesting question: did the recent ultra-low mortgage rates pull forward some demand over the last couple of years?

Sales Year-over-Year and Not Seasonally Adjusted (NSA)

The second graph shows existing home sales by month for 2021 and 2022.

Sales declined 8.6% year-over-year compared to April 2021. This was the ninth consecutive month with sales down year-over-year.

The third graph shows existing home sales for each month, Not Seasonally Adjusted (NSA), for a few selected periods. Black and light Purple are the maximum sales per month during the bubble (2005) and the minimum sales during the bust (2008 - 2011). The most recent four years are shown (2019 through 2022).

Sales NSA in May (498,000) were 5.7% below sales in May 2021 (528,000).   The seasonally adjusted decrease was larger (down 8.6% year-over-year) than the NSA decrease since there was one more selling day in May this year.

This decrease, NSA, was similar to change in the markets I track each month.

Housing Inventory is Increasing Seasonally

The fourth graph shows nationwide inventory for existing homes.

According to the NAR, inventory increased to 1.16 million in May from 1.03 million in April.

Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer. The fifth graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Inventory is very low and was down 4.1% year-over-year (YoY) in May.  This includes some pending sales - and doesn’t exactly match some other measures - and it seems likely that active inventory was up year-over-year in May.

Months-of-supply at 2.6 months is above the record low of 1.6 months set in January 2022, but still very low.

Median House Price Growth Still Strong

On prices, the NAR reported:

The median existing-home price for all housing types in May was $407,600, up 14.8% from May 2021 ($355,000), as prices increased in all regions. This marks 123 consecutive months of year-over-year increases, the longest-running streak on record.

Median prices are distorted by the mix (repeat sales indexes like Case-Shiller and FHFA are probably better for measuring prices).

The YoY change in the median price peaked at 25.2% in May 2021 and slowed to 13.6% in October (still very strong increase in prices). But has picked up a little again, and the YoY increase in May was slightly smaller than the YoY increase in April

Key point on Timing of Sales

Existing home sales are reported when the transaction closes. So, sales in May are mostly for contracts signed in March and April when mortgage rates were significantly lower than today (and many buyers locked in the mortgage rate as soon as possible).

30-year mortgage rates in March were around 4.2% according to Freddie Mac. And rates increased to around 5% in April. Now rates are slightly over 6%.

My sense is contracts for sales really declined in June, and that will show up as closed sales in July and August.