Existing-home sales set record

June 25, 2004

'Fence-jumping' may be a factor in continuing real estate boom

By Glenn Roberts Jr.
Inman News

The rate of existing-home sales set a new monthly record in May, fueled in part by the "fence-jumping" scramble of buyers getting into the market before interest rates rise any higher, according to the National Association of Realtors.

Existing-home sales increased 2.6 percent over April, to a seasonally adjusted annual rate of 6.8 million units. This seasonally adjusted annual rate represents the amount of existing home sales that would be carried out if the same monthly pace were sustained for a year.

The previous record rate of 6.68 million was set in September 2003. The May 2004 rate is about 15.8 percent above the pace recorded in May 2003.

David Lereah, chief economist for the association, said in a statement, "Fundamentals are still very favorable for a vibrant market. In part, the record results from a natural 'fence-jumping' by buyers getting into the market after mortgage interest rates began to rise at a sharper clip in April. "This may be the last peak in home sales for a while and existing-home sales are likely to be slower during the second half of the year. Even so, they will remain at strong levels and 2004 is on track to be a record."

The national median existing-home price was $183,600 in May, up 10.3 percent from May 2003, and the average price was $235,500, up from $212,900 in May 2003. In April 2004, the national median price was $177,100 and the average price was $229,000.

Prices have jumped about 18.6 percent in the Northeast from May 2003 to May 2004, and that regional increase is the highest in the nation. But existing-home prices in the Western region are still substantially higher than any other region. Median existing-home prices in the West climbed to $257,900 in May, and average home prices reached $308,500. The Midwest had the lowest mean price, at $152,700, and the lowest average price of $187,100.

Walt McDonald, president of the National Association of Realtors, said, "The growth in home prices hasn't slowed yet, but in the second half of the year we're expecting an ease in sales to take some of the pressure off of appreciation rates resulting from lean inventories of homes available for sale. This will be a healthy change for the housing market because slower appreciation will help to preserve favorable housing affordability conditions in the future."

Housing inventory levels at the end of May rose 0.8 percent from April to a total of 2.38 million existing homes available for sale, which represents a 4.2-month supply at the current sales pace.

Existing-home sales in the Northeast declined 1.4 percent from April to a pace of 720,000 units in May, but were 7.5 percent higher than May 2003. The median resale price in the Northeast was $213,200, up 18.6 percent from a year ago.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.27 percent in May, up from 5.83 percent in April; it was 5.48 percent in May 2003.

Copyright: Inman News Features

Contact ALTA at 202-296-3671 or communications@alta.org.