The numbers: Existing-home sales fell for the fourth consecutive month, as buyers continue to face major hurdles in the road to becoming homeowners.
Existing-home sales fell 0.9% to a seasonally adjusted annual rate of 5.8 million in May, the National Association of Realtors reported. Compared with May 2020, home sales were up nearly nearly 45%, though the year-over-year comparisons are skewed by the onset of the COVID-19 pandemic last year.
Economists polled by MarketWatch had projected existing-home sales to come in at 5.73 million.
“Home sales fell moderately in May and are now approaching pre-pandemic activity,” said Lawrence Yun, the chief economist for the National Association of Realtors. “Lack of inventory continues to be the overwhelming factor holding back home sales, but falling affordability is simply squeezing some first-time buyers out of the market.”
The big picture: Momentum in the housing market appears to be waning—at least relatively speaking. A combination of issues is to blame. The low supply of homes is certainly frustrating to buyers, some of whom may be opting to sit things out in the hopes of more properties coming to the market. And the homes that are for sale often fetch multiple offers, driving the sale price into an unaffordable territory for many—even with historically low interest rates.
Still, many of the factors that prompted the massive wave of home buyers to enter the market throughout the course of the pandemic remain. In particular, millennials are reaching their prime home-buying years—they’re getting married and having kids—and that should continue to stoke interest in homeownership among them.
What they’re saying: “Housing demand continues to cool from the torrid pace through the turn of the year, with the pandemic-motived wave of buying likely crested and sharply higher prices eroding affordability. But, demand should remain warm, with mortgage rates running in a record-low range, millennials pulling forward home purchase plans that were supposed to unfold over the next few years, and increased saving helping more would-be buyers cross their down payment thresholds,” said Michael Gregory, deputy chief economist at BMO Capital Markets.
“We are approaching the critical summer season, when the volume of real estate sales reaches its peak during a typical year. With four consecutive monthly declines in existing home sales, May’s sales activity points to a potential moderation in growth for the remainder of 2021,” said George Ratiu, senior economist at Realtor.com.