Tight Supply Drives Existing Home Prices Higher

Salesrnof existing homes fell in May, but that decline may have been due to a lack ofrnavailable homes rather than a lack of demand. rnAccording to the National Association of Realtors® (NAR), total existingrnhome sales including single family homes, townhomes, condominiums, andrncooperative apartments, declined 1.5 percent to a seasonally adjusted annualrnrate of 4.55 million in May from 4.62 million in April.   Salesrnwere up 9.6 percent from the 4.15 million sales pace in May 2011.  The national median existing-home price³ for all housing types rose 7.9 percent to $182,600rnin May from a year ago, the third consecutive month of year over year pricerngains.</p

Therntotal inventory of homes for sale at the end of May was down 0.4 percent torn2.49 million existing homes, a 6.6 month supply at the current sales pace.  One year ago there was a 9.1 month supply andrnat a cyclical peak in July 2010 the inventory stood at a 12.1 month supply.</p

Existing Home Sales</p

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Lawrence Yun,rnNAR chief economist, said inventory shortages in certain areas have beenrnbuilding all year.  “The slight pullbackrnin monthly home sales is more likely due to supply constraints rather thanrnsoftening demand.  The normal seasonalrnupturn in inventory did not occur this spring,” he said.  “Even with the monthly decline, home salesrnhave moved markedly higher with 11 consecutive months of gains over the samernmonth a year earlier.”</p

Yun said properties in thernlower price ranges are in short supply in much of the country outside of thernNortheast.  Real estate agents in westernrnstates have been calling for an expedited process to get additional foreclosedrnproperties on the market to alleviate shortages and much of Florida is in arnsimilar situation.</p

Sales of single family homesrnwere down 1.0 percent to a seasonally adjusted rate of 4.05 million from 4.09rnmillion in April.  This is 10.4 percentrnabove the 3.67 rate of sales one year earlier. rnCondo and co-op sales were down 5.7 percent to a rate of 500,000 fromrn530,000 a month earlier but are 4.2 percent higher than a year earlier. </p

The median price for a single-familyrnhome was $182,900, an increase of 7.7 percent from May 2011 while the medianrncondo price saw an annual increase of 8.8 percent to a median of $180,000.  “Some of the price gain results from arnshrinking share of distressed homes in the sales mix,” Yun explained.</p

Foreclosures accounted for 15 percent ofrnsales in May and short sales for 10 percent. rnThis 25 percent share is down from 28 percent in April and 31 percent inrnMay 2011.  Foreclosures sold for anrnaverage discount of 19 percent below market value in May, while short salesrnwere discounted 14 percent.</p

First-time buyers accounted for 34rnpercent of purchases, down from 35 percent in April and 26 percent in May 2011.rn Investors purchased 17 percent of homes,rndown from 20 percent in April and 19 percent a year earlier.  All-cash sales represented 28 percent ofrntransactions compared to 29 percent and 30 percent in the earlier periods. </p

NAR President Moe Veissi said there are reportsrnof multiple offers and quick sales in areas with a tight supply of housing andrnof competition between first-time buyers and cash investors.  He advised buyers to continue to perform due diligencernand make offers with appropriate contingencies as they would in a more balancedrnmarket.</p

Regionally, existing-home sales in the Northeast fellrn4.8 percent to an annual level of 590,000 in May but are 7.3 percent higherrnthan May 2011.  The median price in thernNortheast was $250,700, up 3.8 percent from a year ago.</p

Midwest sales rose 1.0 percent to a pace of 1.04 million,rn9.5 percent above a year ago.  The medianrnprice in the Midwest was $147,700, up 6.4 percent from May 2011.</p

Sales in the South were down 0.6 percent to an annual levelrnof 1.78 million but are 9.2 percentrnhigher May 2011. rnThe median price in the South was $159,700, up 7.8 percent from a yearrnago.</p

Existing-home sales in the West declined 3.4 percent tornan annual pace of 1.14 million in May but are 3.6 percent above a year ago.  The median price in the West was $233,900, uprn13.4 percent from May 2011.  “The sharprnprice increase in the West results largely from more sales at the upper end ofrnthe market,” Yun explained.

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