Housing starts and new home sales are interesting, but the main show in real estate is existing home sales, which make up about 90% of the market. Judging by the numbers in May, things were pretty terrible in what is normally the high selling season. U.S. home sales dropped to an annual rate of just 3.91 million last month, their lowest level in more than 9-1/2 years, a much bigger fall than the expected 3% decline.
It’s even worse when compared to last May. On a year-over-year basis, existing home sales plunged 26.6%, the largest annual decline since 1982.
But in recent weeks mortgage applications surged to an 11-year high, suggesting people are back out looking for homes in June. Unfortunately, the supply of homes available for sale is still tight, indicating a strong housing market recovery would be hard to pull off because there just aren’t enough homes on the market.
There were 1.55 million previously owned homes on the market in May, down 18.8% from a year ago. The median existing house price rose 2.3% from a year ago to $284,600 in May. That was the smallest gain since February 2012.
While May might have been the bottom for housing, we shouldn’t expect sales to bounce all the way back to pre-pandemic levels.