Existing-home sales hit record in May

June 23, 2005

Home prices up 12.5 percent in past year

Inman News

Sales of existing homes were at the second-highest pace on record in May as mortgage interest rates continued to decline, the National Association of Realtors reported today.

Total existing-home sales – including single-family, town homes, condominiums and co-ops – slipped 0.7 percent in May to a seasonally adjusted annual rate of 7.13 million from a record of 7.18 million in April. Sales were 3.5 percent above the 6.89-million-unit level in May 2004. Aside from the last two months, the previous record was a sales pace of 7.02 million in June 2004.

David Lereah, NAR’s chief economist, said low interest rates, population factors and job growth are driving home sales. “Most of the stars continue to be correctly aligned for the housing market,” he said. “An ongoing problem is the tight supply of homes available for sale, which is pushing gains in home prices.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 5.72 percent in May, down from 5.86 percent in April; the rate was 6.27 percent in May 2004.

The national median existing-home price for all housing types was $207,000 in May, up 12.5 percent from May 2004 when the median price was $184,000. The median is a typical market price where half of the homes sold for more and half sold for less.

NAR President Al Mansell, of Salt Lake City, cautions buyers to avoid shortcuts and to take time to fully understand all aspects of the purchase. “In a market where it’s common to see multiple bids on homes, buyers should avoid the temptation to skip appropriate inspections or documentation that would protect their interests,” he said. “Even more important is to understand the riskier loan products that are on the market today. There are insufficient disclosures regarding the risks of some of these products, so be sure to work with a professional who can offer guidance on the kinds of loans that are better suited for your situation.”

Total housing inventory levels rose 4.9 percent at the end of May to 2.55 million existing homes available for sale, which represents a 4.3-month supply at the current sales pace.

Lereah said, “We need about a six-month supply of homes on the market to have a rough equilibrium between home buyers and sellers. For the foreseeable future, the demand for homes will continue to outstrip supply, but we expect the inventory situation to improve in 2006 and take some of the pressure off of home prices.”

Existing condominium and cooperative housing sales hit a record in May, rising 2.2 percent to a seasonally adjusted annual rate of 922,000 units from a level of 902,000 in April. Last month’s sales activity was 10.6 percent above the 834,000-unit pace in May 2004. The median condo price was $221,000, up 15.2 percent from a year earlier. Condo sales accounted for 12.9 percent of market activity in May.

Single-family home sales slipped 1.1 percent to a seasonally adjusted annual rate of 6.21 million in May from a record of 6.28 million in April, and were 2.5 percent above the 6.06-million-unit pace in May 2004. The median single-family home price was $204,600 in May, up 12.2 percent from a year ago.

Regionally, total existing-home sales in the West rose 1.9 percent to an annual rate of 1.63 million units in May, but were 0.6 percent below the same month a year ago. The median existing-home price in the West was $305,000, up 19.1 percent from May 2004.

Existing-home sales in the Northeast held even at a record annual pace of 1.2 million units in May, and were 8.1 percent above the level of May 2004. The median existing-home price in the Northeast was $246,000, up 13.9 percent from a year ago.

The home resale pace in the South slipped 0.7 percent from a record in April to a level of 2.72 million units in May, and was 5.4 percent higher than a year ago. The median price of an existing home in the South was $181,000, which was 7.7 percent higher than May 2004.

Total existing-home sales in the Midwest declined 3 percent from a record in April to an annual rate of 1.59 million in May, and were 0.6 percent above May 2004. The median price in the Midwest was $169,000, up 10.5 percent from a year earlier.

The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns.

Existing-home sales, which include single-family, town homes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 percent of total home sales, are based on a much larger sample – nearly 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.

Copyright 2005 Inman News

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