Existing home sales in May, likely covering contract signings in February thru April, totaled 5.62mm, 70k more than expected while April was revised down by 10k to 5.56mm. The May figure is just about right in line with the average year to date of 5.61mm. For a 3rd straight month, months’ supply crept up to 4.2 which is the most since October which also coincides with the most amount of homes for sale since October as higher prices start to bring out more supply. To this, the median home price at closing rose 5.8% y/o/y to $252,800, a record high. This is of course great if you are the seller but challenging for the buyer who is trying to save up for a down payment. The monthly payments though remain reasonable because of low rates but home prices continue to rise well more than the rate of CPI.
After rising to a multi year high last month at 34%, first time home buyers made up 33% of purchases which remains well below the long time average of 40% for reasons discussed many times. This cohort needs more supply of homes priced below $250k and sales in the group of homes priced between $100k-$250k rose only 2% y/o/y. Homes priced more than $750k had the biggest y/o/y gains (26% y/o/y increase for homes priced between $750-$1mm and 29% y/o/y jump for homes priced above $1mm) which also then skews the median price higher. Also of note, Days on Market fell to just 27 from 29 in the month prior and vs 32 one year ago. To these points made, the NAR said “Those able to close on a home last month are probably feeling both happy and relieved. Listings in the affordable price range are scarce, homes are coming off the market at an extremely fast pace and the prevalence of multiple offers in some markets are pushing prices higher.”
On my consistent point month after month and the belief that we’ve reached an inflection point on pricing where buyers are pushing back, the NAR also said “Home prices keep chugging along at a pace that is not sustainable in the long run. Current demand levels indicate sales should be stronger, but it’s clear some would be buyers are having to delay or postpone their home search because low supply is leading to worsening affordability conditions.”
Bottom line, these home price gains of 5-6% are sowing the seeds for an eventual housing slowdown as buyers push back. Even sellers realize the opportunity they are being given as measured by the high number of people that say ‘it’s a good time to sell a house’ in both the UoM and Conference Board confidence surveys. I remain bullish on multi family housing notwithstanding the large supply coming online because I think demand is going to remain pretty strong in light of all this.
MEDIAN HOME PRICE