Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for May showing worsening and uniform weakness to the nations housing markets.
Senior Economist Lawrence Yun is now suggesting that the decline is mostly as a result of the psychology of buyers but interestingly, and somewhat atypically, offers a more fundamental reason for the lack of demand, namely dramatically decreased household formation.
“I think psychological factors are currently the biggest drag on the housing market, in addition to a disruption from tighter credit for subprime borrowers, … Household formation has slowed dramatically since late 2006, implying that many people are doubling-up – they’re adding roommates or moving in with parents.
“The market is underperforming when you consider positive fundamentals such as the strength in job creation, economic growth, favorable mortgage interest rates and flat home prices. It appears some buyers are simply waiting for more signs of stability before they get serious about getting into the market.”
Additionally, NAR President Pat Vredevoogd Combs continues to attempt to scare buyers into action with the threat of increased interest rates.
“Although mortgage interest rates are trending up, they are historically favorable, … Buyers who’ve been on the sidelines may want to take a closer look at current conditions in their area – if they wait for sales to rise, their choices and negotiating position won’t be as good as they are now.”
Looking at May’s Existing Home Sales report should only result in additional confirmation that the nation’s housing markets are continuing to experience weakness with virtually all regions showing considerable declines to median price AND sales as well as significant increases to inventory and monthly supply.
Sales are, in fact, down in EVERY region with the majority of declines in the double digits.
Keep in mind that we are now seeing existing home sales declines on the back of last years fairly dramatic declines further indicating that the housing markets are not bottoming as many had been suggested last fall.
Below is a chart consolidating all the year-over-year changes reported by NAR in their May 2007 report.
Particularly notable are the following:
- Overwhelming majority of median prices are now down.
- ALL sales are down with most in the double digits.
- ALL Inventory and Months Supply show HIGH double digit increases on a year-over-year basis.