Sold signs stand in front of new homes under construction Monday, March 15, 2021, in Houston. Sales of new homes fell a bigger-than-expected 5.9% in April, a drop that analysts blamed in part on soaring home prices. (AP Photo/David J. Phillip)
WASHINGTON (AP) — Sales of previously-occupied homes fell for the fourth straight month in May as soaring prices and a limited number of available properties discouraged many would-be buyers.
Existing home sales dropped 0.9% last month from April to a seasonally-adjusted annual rate of 5.8 million units, the National Association of Realtors said Tuesday. The string of sales declines comes after sharp gains last fall and through the winter, as many Americans sought more living space during the pandemic. Sales are up nearly 45% from last May, when purchases fell to their lowest point of the COVID-19 outbreak.
The drop in sales suggests that the hot housing market is cooling a bit, even as hiring is steady and the economy is recovering rapidly from the pandemic recession. Home sales boomed last year as many Americans sought more living space during the pandemic. That lowered the number of homes available and caused prices to spike.
That increase has likely frustrated many would-be home buyers, particularly first-time buyers, and led them to postpone a home purchase. The median sales price topped $350,000 last month, the NAR said, a record high.
The number of homes for sale rose slightly in May, to 1.23 million, still very low by historical standards, and down nearly 21% from a year earlier. Perhaps revealing as well as any other statistic how skewed the housing market has become this year, there are now more realtors than there are homes for sale.
The housing market also increasingly reflects growing wealth and income disparities stemming from the pandemic, when most white-collar workers kept their jobs and many benefited from a rising stock market. Lawrence Yun, chief economist of the NAR, said that the rapid growth in the sales price of a typical home is largely driven by much stronger sales of more expensive properties. Sales of homes priced above $1 million have more than tripled in the past year, Yun said.
Another driver has been increased activity on Wall Street in the acquisition of single-family homes. Big institutional investors have begun to buy property and rent them out. All-cash transactions, which includes investors and wealthy buyers, made up 23% of sales in May, up from 17% a year ago.
“Many first-time buyers are being squeezed by a one-two combo of declining affordability and real estate investors moving into the same price segment,” said George Ratiu, senior economist at Realtor.com.
Prices rose so quickly that by May, roughly half of all homes sold were purchased for more than their asking price, according to real estate brokerage Redfin. Two years earlier, before the pandemic, just one-quarter of sales were above the asking price.
Historically low mortgage rates have helped fuel sales by making monthly payments more affordable. The average interest rate on a 30-year mortgage fell to 2.93% last week, according to mortgage buyer Freddie Mac. 7 Stocks to Buy That Will Benefit From Inflation
There are two narratives that are getting conflated when it comes to inflation. The first is whether or not inflation is occurring. And the second is whether inflation will get out of control.
To the first point, the clear answer is absolutely. There are price increases in everything from commodities to semiconductor chips. And even though lumber prices have gone down it’s a good bet that many consumers will put off their deck projects for another day.
And, of course, inflation numbers tend to strip out gas and groceries – but those are precisely the areas where consumers feel inflation the most. Inflation is real.
But is this just “transitory” as many analysts and the Fed itself claim? Or is it only the beginning of something much worse? The answer to those questions is probably above our pay grade.
As an investor, the inflation narrative only changes where you allocate your investment dollars. And for the most part, you’re probably only looking at a small percentage of your portfolio.
However, the first rule of investing is to not lose money so it’s important to identify companies that can provide a hedge against inflation – transitory or otherwise.
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View the "7 Stocks to Buy That Will Benefit From Inflation"