Brad O’Connor Directly addresses camera:
Hello, I’m Dr. Brad O’Connor, chief economist for Florida Realtors. I’m coming to you for the first time from Florida Realtors brand new set. Now, let’s get started with this month’s report.
A good place to begin is by looking at home prices. In May, the median price for closed existing single family home sales remained pretty much exactly in line with last year.
For the second month in a row. If you download and look at our newly released monthly report for May, you’ll see we reported a year over year change of 0.0%, which as always we’ve rounded to the nearest 10th of a percent. But if we really want to be exact, there was an actual tiny decline here of just $100 compared to a year ago when we were at $420,000. So now we are at $419,900. But again, we’re essentially the same as a year. ago.
This is just a continuation of the pattern we’ve seen pretty much all year during which 30 year fixed mortgage rates have persistently remained in the 6 to 7% range for the most part. This has led to a stabilization in price growth, which, depending on your perspective, has not been entirely a bad thing. Most of the real pain from these relatively high rates, however, continues to manifest in the form of reduced listing and sales activity.
The monthly number of closed sales of existing single family homes in Florida and throughout the rest of the U.S., for that matter, has eroded ever since mortgage rates started going up a little more than a year ago. Looking at last year’s closed sales by month, we can see they peaked in March, but soon thereafter began to wane as 30 year fixed mortgage rates started rising from 3% at the beginning of the year, all the way up to 7% by November.
Adding this year into the mix, we see a nice rebound in overall sales in May compared to last month, which was partially driven by May having more business days than April. So with sales weakening at this time last year and sales keeping close to their current pace this year, the year over year decline, this may was only eight and a half percent, which is certainly an improvement over April’s year over year decline of over 17%.
We should expect to see year over year figures like this for the next few months since we are going to be comparing this year’s numbers to numbers last year that were in decline over the course of the year. In terms of this year, there’s nothing on the immediate horizon that indicates the rate of sales is going to worsen significantly.
But there’s not a lot of news out there that gives us confidence that they will improve significantly either. For the most part, the housing market seems to be waiting for a pullback in interest rates and the latest statements and actions from the Federal Reserve seem to indicate that is still several months away. In fact, the financial markets are currently betting that there will be two more rate increases this year before the Fed completely stops.
After that, it is just a question of when they will start reducing rates again. And as always, it’s important to point out that the Fed only really controls short term interest rates, but their actions do have a significant impact on where long term rates like mortgage rates are set.
Interestingly enough, the dollar volume of closed existing single family home sales in May was just shy of $16 billion, or about 8.7% below the dollar volume recorded for last May.
Dollar volume continues to be very strong because even though sales have declined, prices for the most part have not. For this may in particular, we also saw fairly strong numbers of close sales above $1 million compared to previous months this year. So that also contributed to a strong dollar volume number. This may over in the townhouse and condo category.
We saw a similar story with prices and sales. The median sale price for existing townhouses and condos was up year over year by a little less than 1% to $325,000. Closed sales in this category, however, were down year over year by over 14%. As I mentioned earlier, these high rates are not only dampening sales activity, but they continue to dissuade some homeowners from selling as well, particularly those who would need to finance another home purchase in addition to selling their current home
In the single family home category, new listings have been consistently low so far this year. The number of single family new listings this May was actually our lowest read for many new listings since 2015.
Couple that with the trend from this time last year when we had a brief three month period of elevated new listings as rates were just starting to rise and you get a year over year decline for this May of over 22%. The rate at which single family homes came onto the market in May more or less matched the rate at which they went off market.
So inventory at the end of May was comparable to that of the end of April, at the end of May. The inventory level for single family homes was up almost 47% compared to a year ago, but was still down by over 37% compared to this time in 2019 prior to the pandemic. Again, it’s a similar story over in the townhouse and condo category.
In May, new listings for this category were down over 16% year over year. The end of May level of townhouse and condo inventory was up over 72% compared to a year ago, but remained 43% below where it was this time in 2019.
If we look at inventory for both categories over the long term, we also see that not only are we still below pre-pandemic levels, but we are well below where we were coming out of the Great Recession.
This remains one of the single most distinct and important differences between this market and the market we faced in the Great Recession. This time around, we have not seen dramatic levels of overbuilding. And because current homeowners have much stronger credit and fixed rate loans, for the most part, the danger of a huge burst of distressed sales coming onto the market is simply not there.
And on top of all of that, the higher mortgage rates are keeping the number of existing homes coming onto the market quite low. Home sale prices quite simply will continue to be dictated by supply and demand. We have fewer prospective buyers than a year ago, but we also have fewer active sellers. Prices will be dictated by this ratio, and unless it shifts dramatically in one direction or another, prices should remain stable in the meantime.
That’s all for this month. Realtors, be sure to check out Sunstats dot Florida Realtors dot org to get the latest statistics for your local markets. It’s always important to have a handle on your local market because, as you know, it doesn’t always follow the statewide trends. I’ll see you next month with the June numbers.