Existing home sales, as reported by the National Association of Realtors (NAR), fell for the third straight month in May as the coronavirus pandemic shut down much of the country’s economic activity and hit the labor market. However, because existing sales are a reflection of closed contracts, sales likely reached a recession low point in the May data.
Total existing home sales, which includes single-family homes, townhomes, condominiums and co-ops, dropped 9.7% to a seasonally adjusted annual rate (SAAR) of 3.91 million in May, the lowest level since October 2010. On a year-over-year basis, sales were 26.6% lower than a year ago.
The first-time buyer share decreased to 34% in May from 36% last month but up from 32% a year ago. The inventory level rose to 1.55 million units from 1.46 million units in April and down from 1.91 million units a year ago.
At the current sales rate, the May unsold inventory represents a 4.8-month supply, up from 4.0-month in April but down from a 4.3-month a year ago.
Homes stayed on the market for an average of 26 days in May, down from 27 days last month but equal to 26 days a year ago. In May, 58% of homes sold were on the market for less than a month.
All-cash sales accounted for 17% of transactions in May, up from 15% last month and down from 19% a year ago.
Despite the steep monthly decline in sales, home prices remained strong. The May median sales price of all existing homes was $284,600, up 2.3% from a year ago, representing the 99th consecutive month of year-over-year increases. The median existing condominium/co-op price of $252,300 in May was down 1.6% from a year ago.
Regionally, three out of four regions saw a double-digit decline in existing home sales in May compared to previous month, ranging from 10.0% in the Midwest to 13.0% in the Northeast. Sales in the South fell 8.0% in May. On a year-over-year basis, sales declined in all four regions as well, with the West seeing the greatest drop (35.1%).
This month’s decline is not surprising as May sales reflected closings of contracts signed in March and April, when most states shut down economic activities to mitigate the virus outbreak. NAR suggests May sales could mark the bottom and expects home sales to rise in the coming months with the economy reopening. Meanwhile, mortgage rates are expected to remain at record lows for the rest of year, which helps to sustain demand and entice homebuyers, but more listings and home construction are needed to meet the rising demand.