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Existing Home Sales Skid Another 3.4 Percent in May, Down Fourth Month

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10 comments on Existing Home Sales Skid Another 3.4 Percent in May, Down Fourth Month

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Existing home sales courtesy of Trading Economics annotations by Mish

The National Association of Realtors reports Existing-Home Sales Fell 3.4% in May; Median Sales Price Surpasses $400,000 for the First Time.

Report Highlights

  • Existing-home sales fell for the fourth straight month to a seasonally adjusted annual rate of 5.41 million.
  • Sales were down 3.4% from the prior month and 8.6% from one year ago.
  • The inventory of unsold existing homes climbed to 1.16 million, or the equivalent of 2.6 months of the monthly sales pace.
  • 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. The median price exceeded $400,000 for the first time.
  • This marks 123 consecutive months of year-over-year increases, the longest-running streak on record.
  • All-cash sales accounted for 25% of transactions in May, down from 26% in April and up from 23% recorded in May 2021.
  • Individual investors or second-home buyers, who make up many cash sales, purchased 16% of homes in May, down from 17% in April and 17% in May 2021.

Average Mortgage Rates 

  • According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage was 5.23% in May. 
  • According to Freddie Mac, the annual average commitment rate across all of 2021 was 2.96%.
  • Mortgage News Daily (MND) shows the average current rate is 6.11%. 
  • MND shows the rate on January 3, 2022 was 3.41%.

Mortgage rates have doubled the average for 2021 and have risen 2.7 percentage points this year.

The NAR’s PowerPoint Presentation has many interesting charts worth a review.

Median Price of Existing Home Sales

Percent Change of Existing Home Sales by Price Range

Year-Over-Year Percent Change of Existing Home Sales

Key Chart Ideas

  • Year-over-year sales are down 10 consecutive months.
  • Sales of homes over $500,000 are up, below $500,000 down
  • The median price of sales continues to rise and hit a new record

Econoday Consensus

Last month, one economist predicted a 4 percent rise in sales. What was that person’s thought process?

This month, the consensus was spot on. 

The median prices is still rising (for now). That will not last long as sellers are rapidly dropping their ask price.

Bust Just Getting Started

Existing home sales courtesy of Trading Economics annotations by Mish

Existing home sales are recorded at closing, new homes at signing. May sales reflect March and April’s mortgage rates, not June’s.

Seventh Largest US Importer Cuts Shipments in Half, Shipping Rates Crash

Note that the Seventh Largest US Importer Cuts Shipments in Half, Shipping Rates Crash

With mortgage rates up 2.7 percentage points this year and doubling from a year ago, this bust is just getting started and with it the demand for goods.

This post originated at MishTalk.Com.

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10 Comments
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8dots
8dots
4 years ago
Existing home sales are plunging. SPX is plunging. We are dying. // In 2007/09 SPX had 5 bear market rallies, all lower highs/ lower lows. In 2000/ 02 6 bear market rallies, all lower highs/ lower lows. 1929/32 was the worst, all lower highs/ lower lows.
But in 2022 SPX had only one bear market rally, a sideways ==> Mar 29 was higher than Feb 2. Now we might get a sharp, a tricky dicky zigzag up.
How far it will go we don’t know. It might last until Sept/ Oct 2022. First SPX might test the 4,100-4,200 area, forming Neckline #1.
After RS1 and RS2, SPX might test the 4,600 area, forming Neckline #2, before dropping to Neckline #1 area bouncing once or twice for RS1, RS2. In order to have a bear market rally #2, the large inverse H&S must fail. Failed is bearish.
But it might not fail, sending SPX to a new all time high, for at least a year and a half…
SPX collapse might be deeper, rally #2 might start later.
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Ethangregory
Ethangregory
4 years ago
I don’t think the bubble is in traditional owner occupied homes. Nor a bubble in SFR rentals. The bubble is in short-term rentals. The prices that investors have paid for these type properties far exceed what you would normally pay for a long-term rental. When the economy slows down look for these investors to move properties or default when their monthly rental income does not meet their obligations.
Many of these Air BnB investors are leveraged to the hilt with promises of fat returns and easy money. Any type of market correction will send this segment spiraling.
Anyone know of a way to short these STR lenders?
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vboring
vboring
4 years ago
The biggest news here is still lack of inventory.
Maybe there’s enough remote work now that people are changing jobs without moving? Maybe there’s a demographic driver? Whatever it is, lack of inventory makes it very easy for a small change in demand to move prices bigly.
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TexasTim65
TexasTim65
4 years ago
In South Florida (Miami-West Palm area) things are still red hot. Overall Florida is still a hot market as there is a constant inflow of people (1000/day is the quoted number) due to people both escaping inane policies (NY, Illinois etc) and older people retiring here.
But unless you are a cash buyer or buying a lower priced home (<500K) getting insurance is becoming increasingly problematic as skyrocketing prices for Hurricane insurance are going to price a lot of people out of the market. Hence you need to be a cash buyer (so you can opt out of Hurricane insurance) or have a lower priced home that qualifies for State subsidized hurricane insurance.
Note. Median prices may rise for quite some time if low end buyers disappear entirely because they can’t afford the interest rates. Instead it may just be people who own homes swapping paid off houses (downsizing or upsizing marginally) that are all that get sold and reported.
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Business Man
Business Man
4 years ago
I like the anecdotes from people around the country, so I’ll submit mine with only what I’ve seen and nothing second-hand.
–Downtown Chicago condos are very stagnant, with many price drops and very little demand. This is mostly crime driven, but then an article came out today that said rents are at historic highs, averaging about $3.55/foot for class A buildings. So buying is soft, but renting is red hot.
–Suburbs of Chicago has seen a collapse in demand at the low end of the market, where my searches are showing price drops in the $250K to $400K range daily. Drops are usually about $10K, and this is only a couple weeks after listing, meaning that they are likely getting zero interest.
–Higher end homes in the $1MM+ are doing a lot better.
–My own experience with repair contractors in the trades is that they are getting more reasonable and not nearly as booked out. Prices for equipment replacement is still in the stratosphere. An HVAC unit (forced air and furnace) coming in at $8100 for a small, 1200 sf home, is something a family member reported.
Illinois is stagnant, and many don’t want to live here, which is why we’re trailing the rest of the nation. Crime in Chicago is the other piece.
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hhabana
hhabana
4 years ago
Prices in Sacramento region still going strong. I have rentals in an area and homes still selling for 3-4 times what they sold after the real estate bust. Saw two price drops of $55,000 for two places that are basically knock downs. Everything else is pending or new listing. These are homes in a lower middle class area where you most likely wouldn’t want to walk in the day and definitely at night. Prices for most part starting at $300,000 and home space starting at 1000 sq ft, but bigger yards. Older neighborhood mostly from late 1950’s thru 70’s. Couple newer construction. Very strong rental area, but home owners too.
I think it depends on location. My suggestion is buy in a good, safer neighborhood or just keep saving money until you can afford to. Doesn’t have to be top 10 net worth, but a better area.
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Zardoz
Zardoz
4 years ago
I work with a guy that bought a couple months ago. We had both been house shopping for almost a year. He can handle the payments, but its going to suck for him to see how much more he could have got for that money.
The bidding wars and inspection waivers scared me off. Told my realtor I’d rent the rest of my life before I’d participate in that nonsense…. and her mouth literally hung open for a full ten seconds. I wasn’t feeling as brave as I was talking though. Recent developments have been a great relief, and I’m watching the price cuts and ‘back on market’ notifications creep in from the hinterlands to the prime real estate in town. New listings and price cuts are about the same frequency now.
The whole economy is a casino at this point.
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killben
killben
4 years ago
“The median prices is still rising (for now). That will not last long as sellers are rapidly dropping their ask price.”
The median price increase is due to the lower priced homes being priced out of the market.
“this bust is just getting started and with it the demand for goods.”
That is a given, will it trigger a credit event or make the Fed develop cold feet remains to be seen.
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Zardoz
Zardoz
4 years ago
Reply to  killben
That’ll be a buy signal. Buy while rates are high and prices are low, then refinance after rates go down.
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RandomNumber1
RandomNumber1
4 years ago
Mish, what are your thoughts on this at the moment? I know you’ve mentioned a ‘collapse’, but are we looking at a complete collapse, roadblocks, or a simple plateau in prices?
I feel like all regions will get hit by this, but it will be more dramatic in certain parts of the country than others.
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