Low Inventory Constraining Existing-Home Sales While Boosting New

Existing-Home Sales

Constricted by the lack of inventory, existing-home sales rose just slightly in May, according to the National Association of Realtors (NAR).

Sales of existing homes reached a seasonally adjusted annual rate (SAAR) of 4.3 million in May. This was just 0.2% higher than the month prior and a 20.4% drop year-over-year.

Home sales are strongly affected by available inventory, NAR said.

While sales of newly constructed homes are going “at a pace reminiscent of pre-pandemic times because of abundant inventory in that sector,” according to NAR chief economist Lawrence Yun, “existing-home sales activity is down sizably due to the current supply being roughly half the level of 2019.”

Sales of existing single-family homes dropped 0.3% month-on-month to a SAAR of 3.85 million. This was off 20% from the pace at this time last year.

Sales of existing condos and co-ops were up 4.7% MoM but still down 23.7% from last year at a SAAR of 450,000 units in May.

New Home Sales

The lack of inventory in existing homes is boosting new home sales, however.

May’s new home sales were at the highest level since February 2022, uplifted by a lack of existing inventory coupled with strong demand, according to the National Association of Home Builders (NAHB).

Sales of new single-family homes rose 12.2% from April to a SAAR of 763,000 units in May, data from the US Census Bureau shows. This was 20% higher than sales in May 2022.

“Demand for new homes is strengthening because of a lack of existing home inventory,” NAHB chairman Alicia Huey commented in a statement.

The inventory of new homes for sale at the end of May was 428,000, which the Census Bureau said represents 6.7 months of supply at current sales rates.

“The lack of resale homes available for sale… is supporting demand for newly built homes,” noted NAHB chief economist Robert Dietz.

“New home inventory was 31% of total inventory in May. Historically it is typically 10% to 15%. Further, the pace of resales is down 20% from a year ago, while the rate of new home sales is up 20% from a year ago,” Dietz said.

By Laura Miller, laura@steelmarketupdate.com