US Existing home sales in May fall to lowest level this year; St. Louis has largest decrease for third consecutive month

Dennis NormanToday’s existing home sales report from the National Association of REALTORS® shows existing home sales in May were at at a seasonally adjusted-annual rate of 4.81 million units which is a decrease of 3.8 percent from the month before and is a decrease of 15.3 percent from a year ago and is the lowest rate of home sales since November 2010 when it was 4.64 million.

Home prices increase for third-consecutive month….

The median home price in the U.S. in May was $166,500, an increase of 3.3 percent from the month before and a decrease of 4.6 percent from a year ago when the median price was $174,600.

Number of homes for sale declines slightly after being on the rise for three months….

The number of existing homes on the market decreased in May by 1.0 percent to 3.720 million homes, and is down 4.4 percent from a year ago when there were 3.893 million homes for sale. Unfortunately, even though the inventory dropped, sales did too, to the supply of homes increased by 3.3 percent to 9.3 months from 9.0 months the month before and is 13.4 percent higher than a year ago when the supply was 8.2 months.

Metro Home Sales and Prices –

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

  • Same as last month, this month only three metro areas saw an increase in sales from a year ago with Miami-Ft. Lauderdale leading the way again with a whopping 24.4 percent increase in sales.
    • Phoenix, AZ moved up from third the prior month to the second largest year-over-year sales increase at 8.1 percent .
    • New York-Northern New Jersey-Long Island came in third with a 1.2 percent increase in sales.
  • St. Louis, MO, for the third consecutive month, had the largest decrease in sales from a year ago again this month, with a 26.2 percent decrease.
    • Philadelphia, PA had the second highest decrease in sales from a year ago with a 24.9 percent decrease, closely followed by Kansas City with a 23.3 percent decrease.
  • Four metros (double the prior month number) saw year-over-year increases in home prices in May.
    • San Antonio, TX, for the third-consecutive month, saw the largest one-year increase in home prices this month with an 3.6 percent increase, followed by Washington D.C. (also for the third-consecutive month) at 2.1 percent, then Houston, TX with a 1.6 percent increase and finally Miami-Ft Lauderdale with a 0.2 percent increase.
    • Phoenix, AZ saw the biggest one-year decrease in home prices this month, with a decline of 14.2 percent, followed by Minneapolis-St. Paul (it’s second consecutive month in this slot) with a 12.6 percent decline and Kansas City with a 9.1 percent decline.

Lawrence Yun, NAR chief economist,said temporary factors held back the market in May, as implied from prior data on contract signings. “Spiking gasoline prices along with widespread severe weather hurt house shopping in April, leading to soft figures for actual closings in May,” he said. “Current housing market activity indicates a very slow pace of broader economic activity, but recent reversals in oil prices are likely to mitigate the impact going forward. The pace of sales activity in the second half of the year is expected to be stronger than the first half, and will be much stronger than the second half of last year.”

Yun said the market also is being constrained by the lending community. “Even with recent economic softness, this is a disappointing performance with home sales being held back by overly restrictive loan underwriting standards,” he said. “There’s been a pendulum swing from very loose standards which led to the housing boom to unnecessarily restrictive practices as an overreaction to the housing correction – this overreaction is clearly holding back the recovery.”

There were notable regional differences in home sales. “A large decline in Midwestern existing-home sales can be attributed partly to the flooding and other severe weather patterns that occurred, but this also implies a temporary nature of soft market activity,” Yun explained.

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 when artificial stimuli, such as 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 for May, 2011 reported by NAR without any adjustment or fluff:

  • There were 458,000 existing homes sold during the month which is an increase of 4.8 percent from the month before and a 12.9 percent decrease from a year ago.
  • Below are highlights from each region for the month;
    • Northeast – 70,000 homes sold, an increase of 6.1 percent from the prior month a decrease of 11.4 percent from the year before.
    • Midwest – 104,000 homes sold, an increase of 11.8 percent from the prior month and a decrease of 20.0 percent from the year before.
    • South – 172,000 homes sold, an increase of 1.8 percent from the prior month and a decrease of 11.8 percent from the year before.
    • West – 112,000 homes sold, an increase of 2.8 percent from the prior month and a decrease of 8.2 percent from the year before.

Other highlights of the NAR Report for May 2011:

  • Distressed sales accounted for 31 percent of all home sales for the month, down from 37 percent the month before.
  • First-Time homebuyers accounted for 35 percent of the home sales for the month, down from 36 percent the month before.
  • Investors were the buyers of 19 percent of the homes for the month, down from from 20 percent the month before.
  • Repeat home buyers were responsible for approximately 46 percent of the month’s sales, up from 44 percent the month before.
  • Cash buyers were 30 percent of all sales for the month, down from the prior months’ 31 percent.

My Take On the Numbers:

I keep calling it a “rocky bottom” and I would say this months numbers hold true to that….while the market appears to be trying to find the bottom, and shows some signs of stabilizing, it seems to be having a hard time doing so. Clearly, this is going to be a long, slow process, to see the market stabilize and eventually go into recovery mode.

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