Existing Home Sales Down Again: Yun Blames Inventory, a Symptom of the Problem


Economists expected a bounce in existing home sales in May. There was no bounce and revisions in April were negative.

Heading into the report this is what Econoday had to say: " Existing home sales fell below Econoday's low estimate in April and a sizable bounce back is expected in May, to a consensus annualized rate of 5.500 million vs April's 5.460 million. Even with a better showing, resales have been stubborn and weak as April's year-on-year rate was in the minus column at negative 1.4 percent."

The consensus estimate for May was 5.5 million. Nope. Actuals came it at 5.43 million with April revised lower to 5.45 million.

Below Expectations Second Month

Mortgage News Daily reports Existing Home Sales Below Expectations for Second Month.

Analysts were expecting existing home sales to rebound in May after they fell behind year-ago levels in April. However, the National Association of Realtors® (NAR) reported a second straight monthly loss, with the Northeast the only region where sales improved.

The May results came in below the lowest of analysts' expectations as reported to Econoday. Those predictions ranged from 5.44 million to 5.65 million with a consensus of 5.50 million.

Single-family home sales declined 0.6 percent to a seasonally adjusted annual rate of 4.81 million from 4.84 million in April and are also 3.0 percent lower than the 4.96 million sales pace a year ago. Existing condominium and co-op sales increased 1.6 percent to a seasonally adjusted annual rate of 620,000 units but remain down year-over-year by 3.1 percent.

Lawrence Yun, NAR chief economist, says a solid economy and job market should be generating a much stronger sales pace than what has been seen so far this year. "Closings were down in a majority of the country last month and declined on an annual basis in each major region," he said. "Incredibly low supply continues to be the primary impediment to more sales, but there's no question the combination of higher prices and mortgage rates are pinching the budgets of prospective buyers, and ultimately keeping some from reaching the market."

NAR Nonsense

Month after month Yun repeats the same nonsense. Supply is not the issue. Supply of affordable homes is the issue.

Sellers cannot get what they need because it will cost them more to move. They are stuck. Buyers cannot afford the prices.

The median existing-home price for all housing types sold during the month was $264,800, an all-time high and a 4.9 percent increase from the May 2017 median of $252,500. It was the 75th straight month of year-over-year gains. The median existing single-family home price was $267,500, up by 5.2 percent on an annual basis. Condo prices increased 2.5 percent to a median of $244,100.

The price of homes dramatically outstrips wage growth. Real hourly earnings for all workers was up one penny in May and flat for the year. For production and supervisory workers real hourly earnings were down a penny year-over-year.

Month after month Yun blames inventory. Inventory is a symptom of the problem.

"Inventory coming onto the market during this year's spring buying season - as evidenced again by last month's weak reading - was not even close to being enough to satisfy demand," added Yun. "That is why home prices keep outpacing incomes and listings are going under contract in less than a month - and much faster - in many parts of the country."

Real Hourly Earnings

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Potential sellers cannot get as much as they need to move because any replacement home is up as well. Buyers cannot afford the prices.

More fundamentally, the Fed re-blew a housing bubble. Bad things happen.

For further discussion of wages, please see Congratulations Workers! You Make a Penny More Per Hour Than Last Month.

Tale of Two Markets

Yesterday, I reported Housing Starts Jump 5% in May, Permits Dip 4.6%: 2nd-Quarter GDP Looking Solid

Housing starts are up 11% vs the first five months in 2017. Those with solid jobs buy new homes or chase the market.

Those who cannot afford to move, buyers and sellers, generally don't. Let's not label that fact as an "inventory problem".

Mike "Mish" Shedlock

Comments (7)
No. 1-7

You are correct Mish. Affordability (or a lack of it) is the problem. There simply aren't enough affordable properties on the market available for sale. If one does hit the market, investors are still lining up to buy it for a rental or flip. It's a crazy, hyper-financialized housing market created by central bank intervention. FYI, for anyone looking at Dallas area home sales, the numbers have been juiced (overstated). Apparently no one other than myself bothered to do a simple fact-check.


Something never mentioned is the cost of selling a home. The last time I sold a house in the 90's I had to pay a 6% sales commission. Around here, houses cost $500K and up. 6% is a huge chunk of change. I would guess this discourages people from upgrading to a better home near their current home.


I don't understand this the monetary politburo says there is no inflation.


Real estate is not an appreciating asset in the long run because of the cost of interest, upkeep and maintenance. Additionally, inefficiencies in existing vs new homes are a big problem. Throw in the facts of taxes, fires, floods and other uncontrollable environmental factors and those that are mobile come out way ahead. NAR is screwed because unless they can constantly flip homes, they don't make a commission. Lending standards are being loosened again and this will result in another bubble that collapses once the economy does. The next recession will be like 2001 and 2007-2009 added up. Short of dropping money from the sky, the Fed will be powerless to control government debt and other instruments in the private sector that blow sky high with a few interest rate increases. People will wonder what the hell went wrong in 2021.


Well, of course anyone who got in before the boom could be inclined to see real estate as a hugely appreciating asset. But it shouldn't be. There are WAY too many cash buyers in the market now, RealtyTrac thinks they are 40% of the market, while our benevolent friends at Goldman Sachs say as high as 57%. This is the result central bank induced liquidity seeking a place to park, not legit demand for housing.

Such an artificial market bodes ominously for the future. I can already hear the protestations, echoing 2007, "but people need a place to live, right? Housing CAN'T drop!!!"


Assets are always dependent on when you buy and sell. An asset is a liability if you buy it near a peak and sell after a drop in prices. A house can be a great asset if you pay it off quickly and do not accrue a lot of interest, especially if you save on rent. House maintenance costs are wildly variable depending on many factors. Not all housing is a money pit.

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