National Association of Realtors
24 May 2016
Despite ongoing inventory shortages and faster price growth, existing-home sales sustained their recent momentum and moved higher for the second consecutive month, according to the National Association of Realtors®. A surge in sales in the Midwest and a decent increase in the Northeast offset smaller declines in the South and West.
Total existing-home sales1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 1.7 percent to a seasonally adjusted annual rate of 5.45 million in April from an upwardly revised 5.36 million in March. After last month’s gain, sales are now up 6.0 percent from April 2015.
Lawrence Yun, NAR chief economist, says April’s sales increase signals slowly building momentum for the housing market this spring. “Primarily driven by a convincing jump in the Midwest, where home prices are most affordable, sales activity overall was at a healthy pace last month as very low mortgage rates and modest seasonal inventory gains encouraged more households to search for and close on a home,” he said. “Except for in the West — where supply shortages and stark price growth are hampering buyers the most — sales are meaningfully higher than a year ago in much of the country.”
The median existing-home price2 for all housing types in April was $232,500, up 6.3 percent from April 2015 ($218,700). April’s price increase marks the 50th consecutive month of year-over-year gains.
Total housing inventory3 at the end of April increased 9.2 percent to 2.14 million existing homes available for sale, but is still 3.6 percent lower than a year ago (2.22 million). Unsold inventory is at a 4.7-month supply at the current sales pace, up from 4.4 months in March.
“The temporary relief from mortgage rates currently near three-year lows has helped preserve housing affordability this spring, but there’s growing concern a number of buyers will be unable to find homes at affordable prices if wages don’t rise and price growth doesn’t slow,” adds Yun.
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage fell from 3.69 percent in March to 3.61 percent in April, which is the lowest since May 2013 (3.54 percent). The average commitment rate for all of 2015 was 3.85 percent.
Properties typically stayed on the market for 39 days in April (47 days in March), which is unchanged from a year ago but the shortest duration since June 2015 (34 days). Short sales were on the market the longest at a median of 120 days in April, while foreclosures sold in 51 days and non-distressed homes took 37 days. Forty-five percent of homes sold in April were on the market for less than a month — the highest since June 2015 (47 percent).
“Looking ahead, with demand holding steady and supply levels still far from sufficient, the market for entry-level and mid-priced homes will likely continue to be the most competitive heading into the summer months,” says Yun.
The share of first-time buyers was 32 percent in April, up from 30 percent both in March and a year ago. First-time buyers in all of 2015 also represented an average of 30 percent.
At last week’s 2016 REALTORS® Legislative Meetings & Trade Expo, U.S. Housing and Urban Development Secretary Julian Castro announced beneficial changes to FHA condo rules, which could help many first-time buyers, are moving forward and are currently at the Office of Management and Budget for review.
“Secretary Castro’s update that the condo rule changes are in their final stages before implementation received great applause from Realtors® both at the forum and throughout the country,” said NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, Florida. “To ensure that purchasing a condo increasingly becomes a viable and affordable option for first-time buyers, NAR supports the ongoing efforts to eliminate unnecessary barriers holding back condo sales. We hope that progress on this condo rule means we’ll see some much-needed changes in the near future.”
All-cash sales were 24 percent of transactions in April, down from 25 percent in March and unchanged from a year ago. Individual investors, who account for many cash sales, purchased 13 percent of homes in April (matching the lowest share since October 2015), down from 14 percent in both in March and a year ago. Sixty-nine percent of investors paid cash in April.
Distressed sales4 — foreclosures and short sales — declined for the second straight month to 7 percent in April, down from 8 percent last month and 10 percent a year ago. Five percent of April sales were foreclosures and 2 percent were short sales. Foreclosures sold for an average discount of 17 percent below market value in April (16 percent in March), while short sales were discounted 10 percent (unchanged from March).
Single-family home sales inched forward 0.6 percent to a seasonally adjusted annual rate of 4.81 million in April from 4.78 million in March, and are now 6.2 percent higher than the 4.53 million pace a year ago. The median existing single-family home price was $233,700 in April, up 6.2 percent from April 2015.
Existing condominium and co-op sales jumped 10.3 percent to a seasonally adjusted annual rate of 640,000 units in April from 580,000 in March, and are now 4.9 percent above April 2015 (610,000 units). The median existing condo price was $223,300 in April, which is 6.8 percent above a year ago.
April existing-home sales in the Northeast climbed 2.8 percent to an annual rate of 740,000, and are now 17.5 percent above a year ago. The median price in the Northeast was $263,600, which is 4.1 percent above April 2015.
In the Midwest, existing-home sales soared 12.1 percent to an annual rate of 1.39 million in April, and are now 12.1 percent above April 2015. The median price in the Midwest was $184,200, up 7.7 percent from a year ago.
Existing-home sales in the South declined 2.7 percent to an annual rate of 2.19 million in April, but are still 4.3 percent above April 2015. The median price in the South was $202,800, up 6.5 percent from a year ago.
Existing-home sales in the West decreased 1.7 percent to an annual rate of 1.13 million in April, and are 3.4 percent lower than a year ago. The median price in the West was $335,000, which is 6.5 percent above April 2015.
1 Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings from Multiple Listing Services. Changes in sales trends outside of MLSs are not captured in the monthly series. NAR rebenchmarks home sales periodically using other sources to assess overall home sales trends, including sales not reported by MLSs.
Existing-home sales, based on closings, differ from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which account for more than 90 percent of total home sales, are based on a much larger data sample — about 40 percent of multiple listing service data each month — and typically are not subject to large prior-month revisions.
The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.
Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began. Prior to this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.
2 The median price is where half sold for more and half sold for less; medians are more typical of market conditions than average prices, which are skewed higher by a relatively small share of upper-end transactions. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if additional data is received.
The national median condo/co-op price often is higher than the median single-family home price because condos are concentrated in higher-cost housing markets. However, in a given area, single-family homes typically sell for more than condos as seen in NAR’s quarterly metro area price reports.
3 Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982 (prior to 1999, single-family sales accounted for more than 90 percent of transactions and condos were measured only on a quarterly basis).
4 Distressed sales (foreclosures and short sales), days on market, first-time buyers, all-cash transactions and investors are from a monthly survey for the NAR’s Realtors® Confidence Index, posted at Realtor.org.
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