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Home Sales Fall Slightly in May; Still Propped-Up By Tax Credit Deals

Dennis Norman

Dennis Norman

May and June Sales Expected to Remain Elevated as Buyers Rush to Close By June 30th Deadline for Tax Credits.

The deadline to buy a home and qualify for the home-buyer tax credit was April 30th so it’s not surprising we saw pending home-sales increase dramatically in March and April as buyers rushed to get “under-contract” before the April 30th deadline. For those home-buyers that were lucky enough to qualify for the home-buyer tax credit they have, unless Congress extends the deadline, until June 30, 2010 to close on the purchase of their home. Therefore, as I have said before, I fully expect to see “existing home sales” (a report that counts actual “closed” sales) elevated for May and June as these deals close.

Today’s existing home sales report from theNational Association of REALTORS(R), as expected, shows strong sales for the month of May. Existing home sales in May were at at a seasonally adjusted-annual rate of 5.66 million units which is actually a decline of 2.2 percent from April but is still 19.2 percent higher than a year ago.

Prices on the rise for third consecutive month –

The median home price in the U.S. in May was $179,600 an increase of 4.2 percent from April and an increase of 2.7 percent from a year ago when the median price was $174,800.

Inventory levels rescind-

After increasing for four consecutive months, the number of existing homes for sale in May finally decreased to 3,892,000, a decrease of 3.4 percent from April and an increase of 1.1 percent from a year ago. The number of months “supply” this inventory represented in May, based upon current sales levels, decreased slightly to 8.3 months from 8.4 months in April and a 14.4 percent decrease from a year ago when there was a 9.7 month supply.

Metro Home Sales and Prices –

NAR publishes existing home sales for 20 major metropolitan areas of the U.S. Highlights from that report include:

  • Portland, Oregon for the third consecutive month, saw the largest year-over-year increase in existing home sales in May with an increase of 40.6 percent in sales from a year ago.
    • Boston, Massachusetts went from number three last month to number two for May with a 36.2 percent increase in existing home sales from a year ago.
    • Philadelphia, Pennsylvania was number three with a 35.7 percent increase in existing home sales from a year ago.
  • Philadelphia, Pennsylvania led the way in price increases from a year ago, with May’s median home price of $265,700 representing a 28.5 percent increase from a year ago when the median price was $206,800.
    • San Diego, CA came in second with a median price of $391,400, a 18.2 percent increase from a year ago when it was $331,200.
    • Phoenix, Arizona came in third with a median price of $144,800, a 10.8 percent increases from a year ago when it was $130,700.
  • St. Louis saw an increase of 25.5 percent in existing home sales in May from a year ago and an increase of 6.5 percent in median home prices for the same period.

Lawrence Yun, NAR chief economist, said he expects one more month of elevated home sales. “We are witnessing the ongoing effects of the home buyer tax credit, which we’ll also see in June real estate closings,” he said. “However, approximately 180,000 home buyers who signed a contract in good faith to receive the tax credit may not be able to finalize by the end of June due to delays in the mortgage process, particularly for short sales.”

I don’t like “seasonally adjusted rates of sales”:

If you have been reading my posts for a while you know by now I don’t like “seasonally adjusted” numbers (nor does Standard & Poors now either as I wrote about), particularly when artificial stimuli, such as homebuyer tax-credits, can cause an unseasonal spike in sales activity. I much prefer to see the actual numbers and try to garner from them what is going on in the housing market.

The following are the ACTUAL Existing Home sales reported by NAR without any adjustment or fluff:

  • There were 526,000 existing homes sold in May which is a 0.8 percent increase from April and a 17.7 percent increase from a year ago.
  • Below are highlights from each region:
    • Northeast – 79,000 homes sold in May, a decrease of 16.0 percent from April and an increase of 11.3 percent from the year before.
    • Midwest – 130,000 homes sold in May, an increase of 8.3 percent from April and an increase of 21.5 percent from the year before
    • South – 195,000 homes sold in May, an increase of 2.1 percent from April and an increase of 21.9 percent from the year before.
    • West – 122,000 homes sold in May, an increase of 4.3 percent from April and a increase of 11.9 percent from the year before.

Other highlights of the NAR Report:

  • Distressed sales accounted for 31 percent of all home sales in May, down from 33 percent in April.
  • First-Time homebuyers accounted for 46 percent of the home sales in May, down from 49 percent in April.
  • Investors were the buyers of 14 percent of the homes in May, down from 15 percent in April.
  • Repeat home buyers were responsible for approximately 40 percent of May’s sales up from April’s 36 percent..

My Take On the Numbers:

Last month I said I expected “Pending Home Sales” to drop significantly from April and I still do, and I expected to see an increased level of “Existing Home Sales”, “although not at as high of level as April” and that is exactly what we see here. That was the “low-hanging fruit” though, the easy one to call. The harder thing to predict is just how much will the pending home sales numbers for May be and how much will existing home sales drop after the tax-credit deals are all done in June? Unfortunately my guess for both is “rather significantly”.

 

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