Existing Home Sales Fall as Median Price Reaches New High

Existing home sales fell for a third straight month in May while the median price reached a new record high. According to the data from the National Association of Realtors (NAR), existing home sales were down 0.7% from April, reaching a seasonally adjusted annual rate of 4.11 million units. This figure came in higher than the expected 4.08 million. Existing home sales are down 2.8% compared to one year ago.

Existing homes have been experiencing a consistent downward trajectory over the past two years, with monthly sales declining 22 of the past 28 months.

"Eventually, more inventory will help boost home sales and tame home price gains in the upcoming months," said NAR Chief Economist Lawrence Yun. "Increased housing supply spells good news for consumers who want to see more properties before making purchasing decisions.". Read More

Background on Existing Home Sales

Existing home sales measures the monthly sales of previously owned single-family homes. It makes up a huge part of the residential real estate market, as 90% of purchased homes are previously-owned according to the National Association of Realtors. More importantly, there exists a strong correlation between purchases of existing homes and consumer spending. An increase in existing home sales can indirectly stimulate economic activity with increased consumer spending on new furnishings and appliances. Alternatively, a sustained drop in existing home sales often foreshadows a downturn in the economy.

Here is a snapshot of the data series, which comes from the National Association of Realtors. The data since January 1999 was previously available in the St. Louis Fed's FRED repository and is now only available for the last twelve months.

Existing Home Sales

Over this time frame, we clearly see the real estate bubble, which peaked in 2005 and then fell dramatically. Sales were volatile for the first year or so following the Great Recession with monthly sales as low as 3.45 million units to as high as 5.44 million units. We have seen that same volatility following the most recent recession, with sales ranging between 3.85 million units to 6.73 million units.