Washington: Existing home sales in the U.S. unexpectedly showed a modest decrease in the month of April, according to a report released by the National Association of Realtors on Tuesday.
NAR said existing home sales dipped by 0.4 percent to an annual rate of 5.19 million in April after plunging by 4.9 percent to a rate of 5.21 million in March.
The continued decrease came as a surprise to economists, who had expected existing home sales to jump by 2.7 percent to a rate of 5.35 million.
NAR chief economist Lawrence Yun said he is not overly concerned about the unexpected drop in existing home sales and expects moderate growth very soon.
“First, we are seeing historically low mortgage rates combined with a pent-up demand to buy, so buyers will look to take advantage of these conditions,” Yun said.
He added, “Also, job creation is improving, causing wage growth to align with home price growth, which helps affordability and will help spur more home sales.”
The report said the median existing home price for all housing types in April was $267,300, up 2.9 percent from $259,700 in March and up 3.6 percent from $257.900 in the same month a year ago.
Total housing inventory increased to 1.83 million existing homes available for sale at the end of April, representing 4.2 months of supply at the current sales pace.
“We see that the inventory totals have steadily improved, and will provide more choices for those looking to buy a home,” Yun said. “When placing their home on the market, home sellers need to be very realistic and aware of the current conditions.”
NAR said single-family home sales fell by 1.1 percent to an annual rate of 4.62 million in April, while existing condominium and co-op sales surged up by 5.6 percent to a rate of 570,000.
On Thursday, the Commerce Department is scheduled to release a separate report on new home sales in the month of April. New home sales are expected to slump by about 2.8 percent.
The disappointing existing home sales release this morning may be due more to near-record high home prices than lack of supply.
In the six year span between 2000 to 2005, during the lead up to the housing mania that culminated in the Great Recession, the annualized rate for existing home sales was 6.02 million, according to data compiled by Bloomberg. Over the same time frame, supply of existing homes for sale averaged 4.5 months.
During the time frame from 2014 until now, the data appears similar with the annualized run rate at 5.3 million while supply has averaged 4.4 months. Yet, despite supply between the two periods being much the same, some point to a “lack of supply” for the relative paucity of sales now. Arguably, the problem is just as much if not more the lack of a stable dollar.
During the 2000 to 2005 period, the dollar lost 63% of its value versus existing homes. From 2013 year-end to now it has lost 35% versus housing. For this millennium as a whole, the value of a dollar has dropped about 50% versus the existing housing stock.
Existing home prices hit a record of $274k last June, and currently stand at about $267k. From 2000 to 2017, median household income (in current dollars) for Americans with college degrees rose a little over 40%. Meanwhile, the median price of homes doubled, using CPI as a measure.
The inability of the U.S. dollar to hold its value versus real estate may be a primary factor as to why homes aren’t being sold at a faster clip — prices are simply outstripping the ability of many to afford a home, and saving for one using the dollar is a losing proposition.
Investors, however, can look on the bright side of this issue. Lower demand for housing translates into lower supply in the mortgage-backed security sector, helping investor performance. As of May 10, net supply this year totals $39 billion versus $73 billion over same period in 2018, according to Bank of America data.
Why Markets Care About Existing Home Sales Also Called Home Resales
Existing Home Sales report is released monthly, about 20 days after the month ends, by the National Association of Realtors (NAR).
It measures annualized number of residential buildings that were sold during the previous month, excluding new construction. While this is monthly data, it’s reported in an annualized format (monthly figure x12).
The Existing-Home Sales data measures sales and prices of existing single-family homes for the nation overall, and gives breakdowns for the West, Midwest, South, and Northeast regions of the country. These figures include condos and co-ops, in addition to single-family homes.
Existing Home Sales is a leading indicator of economic health because the sale of a home triggers a wide-reaching ripple effect. For example, renovations are done by the new owners, a mortgage is sold by the financing bank, and brokers are paid to execute the transaction.