Tight Supply Drives Existing Home Prices Higher

Sales
of existing homes
fell in May, but that decline may have been due to a lack of
available homes rather than a lack of demand. 
According to the National Association of Realtors® (NAR), total existing
home sales including single family homes, townhomes, condominiums, and
cooperative apartments, declined 1.5 percent to a seasonally adjusted annual
rate of 4.55 million in May from 4.62 million in April.   Sales
were 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 $182,600
in May from a year ago, the third consecutive month of year over year price
gains.

The
total inventory of homes for sale at the end of May was down 0.4 percent to
2.49 million existing homes, a 6.6 month supply at the current sales pace.  One year ago there was a 9.1 month supply and
at a cyclical peak in July 2010 the inventory stood at a 12.1 month supply.

Existing Home Sales

Click Here to View the Existing Homes Sales Chart

Lawrence Yun,
NAR chief economist, said inventory shortages in certain areas have been
building all year.  “The slight pullback
in monthly home sales is more likely due to supply constraints rather than
softening demand.  The normal seasonal
upturn in inventory did not occur this spring,” he said.  “Even with the monthly decline, home sales
have moved markedly higher with 11 consecutive months of gains over the same
month a year earlier.”

Yun said properties in the
lower price ranges are in short supply in much of the country outside of the
Northeast.  Real estate agents in western
states have been calling for an expedited process to get additional foreclosed
properties on the market to alleviate shortages and much of Florida is in a
similar situation.

Sales of single family homes
were down 1.0 percent to a seasonally adjusted rate of 4.05 million from 4.09
million in April.  This is 10.4 percent
above the 3.67 rate of sales one year earlier. 
Condo and co-op sales were down 5.7 percent to a rate of 500,000 from
530,000 a month earlier but are 4.2 percent higher than a year earlier.

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

Foreclosures accounted for 15 percent of
sales in May and short sales for 10 percent. 
This 25 percent share is down from 28 percent in April and 31 percent in
May 2011.  Foreclosures sold for an
average discount of 19 percent below market value in May, while short sales
were discounted 14 percent.

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

NAR President Moe Veissi said there are reports
of multiple offers and quick sales in areas with a tight supply of housing and
of competition between first-time buyers and cash investors.  He advised buyers to continue to perform due diligence
and make offers with appropriate contingencies as they would in a more balanced
market.

Regionally, existing-home sales in the Northeast fell
4.8 percent to an annual level of 590,000 in May but are 7.3 percent higher
than May 2011.  The median price in the
Northeast was $250,700, up 3.8 percent from a year ago.

Midwest sales rose 1.0 percent to a pace of 1.04 million,
9.5 percent above a year ago.  The median
price in the Midwest was $147,700, up 6.4 percent from May 2011.

Sales in the South were down 0.6 percent to an annual level
of 1.78 million but are 9.2 percent
higher May 2011. 
The median price in the South was $159,700, up 7.8 percent from a year
ago.

Existing-home sales in the West declined 3.4 percent to
an 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, up
13.4 percent from May 2011.  “The sharp
price increase in the West results largely from more sales at the upper end of
the market,” Yun explained.

…(read more)

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