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US existing home sales fall more quickly than expected in May

By Alexander Bueso

Date: Monday 22 Jun 2020

US existing home sales fall more quickly than expected in May

(Sharecast News) - Second-hand home sales fell more quickly than expected last month but analysts pointed to various data points, including falling mortgage rates, that augured a rebound in coming month.
In seasonally adjusted terms, existing home sales dropped at a month-on-month pace of 9.7%, pushing the annualised rate of purchases to 3.91m (consensus: 4.15m), the National Association of Realtors said.

And against a year-earlier they were down by 26.6%.

But NAR chief economist, Lawrence Yun emphasised how the May data in fact reflected contract signings from March and April, during the depths of the Covid-19 lockdown.

"Home sales will surely rise in the upcoming months with the economy reopening, and could even surpass one-year-ago figures in the second half of the year," Yuan said.

"New home construction needs to robustly ramp up in order to meet rising housing demand. Otherwise, home prices will rise too fast and hinder first-time buyers, even at a time of record-low mortgage rates," he added.

Indeed, prices were up in all US regions, with a 2.3% increase in the median price to $284,600.

The number of homes available for sale meanwhile jumped by 6.2% on the month to hit 1.55m or the equivalent of 4.8m months worth of sales, against 4.0 months in May and 4.3 months at the same point one year ago.

Other indicators of the market for existing homes also improved, with the length of time spent on the market by a property dipping from 27 days to 26, but the proportion of first-time buyers also decreased, from 36% to 34%.

For his part, Ian Shepherdson at Pantheon Macroeconomics said the data weren't a surprise given April's weak reading for pending home sales.

But the "full recovery and more" in mortgage applications led him to expect a surge in sales over the next few months.

"This might seem odd given the unprecedented scale of the job losses caused by the pandemic, but the median homebuyer is 47, while the median age of people working in restaurants is 29, so a relatively small number of potential near-term homebuyers lost their jobs," Shepherdson argued.

"At the same time, the 70bp drop in the average 30-year mortgage rate, to just 3.3%, has substantially improved affordability for people whose jobs have been unaffected."

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