Reflecting the continuing short supply in the US housing market and the resultant price rise, existing home sales dropped for the second consecutive month in May, when all regions except Northeast registered a decline in activity. The unimpressive sales performance came as a surprise to economists who had expected the sector to benefit from the strong economy and labor market.
Data published by the National Association of Realtors Wednesday showed sales of existing residential properties dipped 0.4% sequentially to 5.43 million in May, contrary to expectations for an increase. Sales witnessed negative growth for the second month in a row.
Sales of single-family homes decreased 0.6% to 4.81 million in May compared to the previous month and dropped 3% from May 2017. At $267,500, the average price of single-family homes was up 5.2% compared to last year.
Region-wise, sales dropped 2.3% sequentially in Midwest and edged down 0.4% in South. While a 0.8% decline was witnessed in West, Northwest rose 4.6% and emerged as the only region to register growth.
Sales of existing residential properties dipped 0.4% sequentially in May, contrary to expectations for an increase
In addition to supply crunch, buyer sentiment was negatively impacted by the rising prices and interest rates. For instance, the average price of an American home jumped nearly 5% year-over-year to a record high of $2,64,800 last month. Home prices have increased continuously for more than six years now.
Over the past three years, the number of existing houses available for sale declined every single month, compared to the prior-year period, though there were sequential gains. On the other hand, the headline mortgage interest rate rose to a seven-year high of 4.59% after being hiked abruptly in May, prompting some entry-level buyers to keep away from the market.
According to real estate dealers, while most individual home sellers are lured by the high prices and demand, they fear that the same factors would make it difficult for them to find a new house after selling their existing homes.
Earlier this week, government data revealed that privately-owned housing starts rose 5% month-on-month in May, entirely due to the strong activity in the Midwest region.