US Sales of Existing Homes Extend Decline; Real estate prices are racing at record highs

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Carpenters work building new townhouses in Tampa, Florida on May 5, 2021. REUTERS / Octavio Jones

US home sales declined for the third consecutive year in April as an acute real estate shortage drove prices to record highs.

Existing home sales fell 2.7% last month to a seasonally adjusted annual rate of 5.85 million units, the National Association of Realtors said on Friday.

Sales declined in the northeast, west and the densely populated south, but increased in the midwest. Economists polled by Reuters had forecast that April sales would rise by 2.0% to 6.09 million units.

Home resales, which account for the bulk of US home sales, increased 33.9% year over year. However, the annual surge was skewed by the fall in sales in April 2020, when the economy slipped from mandatory closings of non-essential businesses to slow the first wave of COVID-19 cases.

The real estate market is being driven by demand for larger, more expensive accommodations after the COVID-19 pandemic forced millions of Americans to work from home and take classes remotely. However, the virus has disrupted the labor supply in sawmills and ports, leading to a shortage of sawn timber and other raw materials.

This limits the ability of home builders to push new home construction, perpetuate a shortage of inventory that drives prices up, and threatens to foreclose first-time buyers from the market. The government reported this week that housing construction fell in April. Continue reading

There is cautious optimism that reopening the economy, facilitated by vaccinating more than a third of the population and massive fiscal incentives, could encourage more homeowners to bring homes to market. Some older Americans have likely delayed mining due to the pandemic.

The median price for existing homes rose 19.1% year over year to $ 341,600 in April.

Economists don’t believe another housing bubble is developing, and note that the spike is mainly due to a supply-demand mismatch, more likely to poor lending practices that sparked the 2008 global financial crisis.

In April, 1.16 million homes were on the market, a decrease of 20.5% compared to the previous year. At the sales pace in April, it would take 2.4 months to run out of current stocks, compared with 2.4 months a year ago.

A supply of six to seven months is considered a healthy balance between supply and demand.

First-time buyers accounted for 31% of sales in April.

Our standards: The Thomson Reuters Trust Principles.

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