The National Association of Realtors released its Existing Home Sales Report for the month of May and it showed that closings on existing homes rose 0.2%. When compared to the year earlier, sales were down 20.4%. Yes, this isn’t a blockbuster report and not as strong as some would have hoped, but we have to remember buyer demand is not the issue. The issue lies with inventory or the availability of homes to be purchased.
Speaking of inventory, there were only 1.08 million homes for sale in May. That is roughly 6% less than the number of homes available at the same time last year. When looking at the number of homes versus the pace of sales, there was about three months’ worth of supply. This is very low and speaks to demand because around 4.6 months of supply represents a more normal or balanced market. When digging deeper, almost 500,000 homes that were counted in the headline inventory number were actually under contract, so when removing them, there were only around a mere 580,000 homes that were actually available. In 2019 there were almost 2 million homes in inventory which were low back then and much more than what we have now.
Homes remained on the market on average for 18 days which was down from the previously reported number of 22 days in April. 75% of all homes that sold were on the market for less than 30 days. One in three homes sold for over list price as well.
Despite slower sales, this report most certainly points to an acceleration in home demand which is supportive of home pricing. With such little supply and such strong demand, home pricing will continue to appreciate. And as forecasters are saying, interest rates are slowly going to drop. This will only add gasoline to the fire of home pricing because as mortgage rates drop, more demand will come from those getting off the fence to pursue a home purchase.
Source : https://bit.ly/3qT7CKR
By: Jon Iacono