Existing-home sales are expected to increase modestly in May for the second consecutive month, according to the First American Existing-Home Sales Outlook Report.
Odeta Kushi, Vice President and Deputy Chief Economist at First American, noted that is welcome sign for the spring home-buying season, especially because mortgage rates have again risen.
For the month of May, First American just updated its Existing-Home Sales Outlook Report to show that:
Existing-home sales for May are expected to increase 0.3% from last month’s sales pace, but remain 0.2% lower when compared with the pace of sales a year ago.
The only contributor to the projected monthly increase in existing-home sales is a resilient economy (+0.4%), Kushi noted.
First American noted that the average 30-year, fixed mortgage rate increased from 6.05 percent in February to roughly 6.3 percent in April, reducing house-buying power by approximately $11,000. It said that affordability remains better than a year ago, but the recent rebound in rates has slowed the momentum buyers carried into spring.
Kushi said that the improvement in sales should also be kept in perspective, however.
Below Pre-Pandemic Normal
She said the housing market continues to operate below its pre-pandemic normal. Nationally, she said, April sales were almost 18% below their April 2018-2019 average, while new listings were also 18% below normal. In other words, Kushi said, the market is not just short of buyers, it is also short of sellers.
Because real estate is local, national averages can mask important differences across markets, Kushi said. Existing-home sales activity in some markets is much closer to pre-pandemic conditions, while others remain deeply constrained. The question is: what separates them?
Sales activity tends to be closer to normal in places where new listings have recovered more fully, she noted.
Provo, Utah, is the standout, Kushi said, with both sales and new listings above their pre-pandemic average. Nashville, Tennessee, and McAllen, Texas, also show relatively strong new listing recoveries, Kushi said, and sales in those markets are closer to their pre-pandemic average than in many other parts of the U.S.
Conversely, markets with deep listing shortfalls tend to have weaker sales activity, she said.
New listings and sales remain far below pre-pandemic average levels in Bridgeport and Hartford, Connecticut, Providence, Rhode Island, Rochester, New York, and Albuquerque, New Mexico.
Must Reach the Price
Kushi said that listings are just a part of the equation.
She said buyers still must be able to reach the price of the homes that are listed. That affordability layer helps explain why more supply does not always translate neatly into more sales.
In markets such as Provo, Utah, Nashville, McAllen, and North Port, Flordia, new listings are closer to, or above, pre-pandemic norms, and sales are also closer to normal. Kushi noted that in those markets, listed homes are also priced relatively closer to local house-buying power, helping buyers turn more options into actual purchases.
Kushi said that in higher-cost markets, such as Los Angeles and San Diego, California, listed homes remain far above local house-buying power, and sales are still well under pre-pandemic norms. She said that San Jose offers a slightly different lesson, that new listings are roughly back to normal, but its sales recovery is only about the national average.
That underscores that supply alone is not enough. The monthly payment still has to work, Kushi said.
