U.S. sales of previously owned homes dropped in May by more than forecast to the lowest level since October 2010 as the coronavirus pandemic sent demand skidding along with the rest of the economy.
Closing transactions decreased 9.7 per cent from the prior month to an annualized pace of 3.91 million, data from the National Association of Realtors showed Monday. The median forecast in a Bloomberg survey of economists called for a 4.09 million rate.
The third straight monthly decline likely reflects the worst of the pandemic-related downturn in residential real estate. While millions of job losses diminish the odds that sales will soon rival February’s 13-year high, home-purchase applications have spiked recently in part because of record-low mortgage rates.
“Just looking at the housing sector itself, it looks to be a V-shaped recovery,” Lawrence Yun, NAR’s chief economist, said on a call with reporters. “For the rest of the economy, it may not be a V-shape.”
The group’s report showed the median home price increased 2.3 per cent from a year earlier to $284,600. Inventory rose 6.2 per cent from a month earlier to 1.55 million but fell 18.8 per cent from a year ago. The number of homes for sale would last 4.8 months at the current sales pace. Anything below five months is seen as a tight market.
Existing home sales dropped in all four U.S. regions in May, including an 11.1 per cent slump in the West and an 8 per cent decrease in the South. Closings also fell 10 per cent in the Midwest and 13 per cent in the Northeast.
The biggest hit to the housing market is centered around the condominium and co-op market as sales slumped 12.8 per cent in May to an annualized 340,000 rate. Those purchases are down almost 25 per cent from a year earlier. The drop in single-family home sales was more moderate -- 9.4 per cent from April -- to a 3.57 million pace.
“Relatively better performance of single-family homes in relation to multifamily condominium properties clearly suggest migration from the city centers to the suburbs,” Yun said in a statement. “The new trend looks to be in the suburbs as more companies allow greater flexibility to work from home.”
Previously owned home sales account for about 90 per cent of U.S. transactions and are calculated when a contract closes. New-home sales, which make up the remainder, are based on contract signings and May data will be released Tuesday.
Other recent data have shown the residential real estate market is beginning to rebound. The Mortgage Bankers Association’s weekly measure of home-purchase loan applications is currently at an 11-year high. June data from the National Association of Home Builders and Wells Fargo showed builder sentiment jumped by a record 21 points.