Implications:    Existing home sales fell again in May, dropping for a third consecutive month as social distancing and government-mandated lockdowns continued to weigh on sales activity. Sales are now down 26.6% from a year ago, the largest annual decline since 2007, as the housing crisis was beginning to unfold.  Regarding the negative headline number, it's important to remember that existing home sales are counted at closing, and that May sales largely reflect contracts that were signed in March and April, during the height of pandemic-related lockdowns nationwide. That means May was likely a cyclical low point, and sales should begin a rebound starting in June.  Notably, buyers have been signaling a preference for more personal space, avoiding dense urban areas in response to the pandemic. Since February, the last full month before the pandemic erupted, sales of condos/coops are down 43.3% while sales of single-family units are down 30.8%.  Going forward, sales still face a headwind from a low inventory of existing homes, as fewer potential sellers have been listing their properties due to anticipated pandemic-related weakness in the market.  Inventories in May were down 18.8% versus a year ago (the best measure for inventories given the seasonality of the data), though that was a slight improvement versus the year-over-year decline of 20.2% in April.  The good news is that demand for existing homes remained strong enough that 58% of homes sold in May were on the market for less than a month.  It's not hard to see why some buyers have stuck around despite the pandemic, with median price growth decelerating from an annual rate of 8.1% in February (pre-pandemic) to 2.3% in May; good deals abound for those who are willing to look.  The coming months will continue to offer us a murky picture of the housing market, but we expect a rebound in activity as state reopening's bring people back to work, and life starts to look a little more "normal."

Click here  for PDF version