Here’s some good news. Existing home sales jumped in May when compared to a year ago. But, the numbers tumbled from April.
This proves yet again that the market is not out of the woods yet. Although we are in the recovery mode, it could still be awhile before the market gets a clean bill of health.
In May, previously-owned homes – including single-family homes, condominiums, and townhouses – sold at a seasonally adjusted annual rate of 4.55 million units, according to the National Association of Realtors®. That’s a decline from the previous month, but a 9.6 percent gain from the same year-ago period.
NAR’s chief economist Lawrence Yun said inventory tightening, not demand softening, has resulted in the sales drop. With less homes in the market, sales were bound to slide.
“The normal seasonal upturn in inventory did not occur this spring,” he said.
Because of falling prices, many sellers are holding off from putting their homes on the market in the hope that there will be an uptick soon. Banks, too, seem to have a similar idea and are not flooding the market with foreclosed homes. There was a 6.6-month supply of homes for sale in May, and although that’s higher than April, it’s 20 percent less than the comparable period a year ago.
Builders Building More New Single-Family Homes
For the third consecutive month in May, builders broke ground on more single-family homes, signaling that demand for such homes is on the rise.
It’s also a sign of a healing market. Single-family homes took a big hit when an anorexic economy scared buyers from investing in the most important purchase of their lifetime. Unemployment, tightening credit and an unpredictable economy kept many buyers off the market thereby deflating the demand for such homes. Renting became more favorable than buying.
But things seem to be changing a bit.
According to the Commerce Department, housing starts for single-family units were at an annual rate of 516,000. That’s up 3.2 percent compared to April. Overall, housing starts declined 4.8 percent to a 708,000 annual pace in May because of a slip in construction of apartment buildings.
Economists surveyed by Bloomberg News were expecting an annual rate of 722,000. An encouraging sign is that building permits, a measure for future construction, also increased 7.9 percent to a 780,000 annual rate, the highest level since September, 2008.
“We saw a very strong number in new permits, indicating builders are seeing improving demand,” Russell Price, senior economist at Ameriprise Financial Inc. in Detroit told Bloomberg. He said that the report “was a lot better than the headline number would suggest.”
Looks like low interest rates and affordable home prices are finally luring buyers into the market. hopefully the trend will continue in the near future.
Home Prices Rising
Sellers celebrate. Home prices rose for the third straight month in April, registering an increase of 0.8 percent compared to the previous month, according to the Federal Housing Finance Agency.
According to the FHFA, home prices rose in six of the nine regions covered by the agency. In the region covering California and Oregon, prices rose 2.2 percent, but fell in the area that includes Massachusetts and Maine, according to Bloomberg.
Analysts surveyed by Bloomberg were expecting a 0.4 percent gain, according to the newswire service.
Tightening inventory, low interest rates and an improving job market contributed to the rise in prices. Bankers have also judiciously held off from flooding the market with foreclosures, thus helping prices from falling any farther.