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U.S. home sales dropped to their lowest level in more than nine and a half years in May, strengthening expectations for a sharp contraction in housing market activity in the second quarter following disruptions caused by the COVID-19 pandemic.
The report from the National Association of Realtors on Monday also showed the smallest annual home price increase in more than eight years. The slump in existing home sales reflected closings on contracts signed in March and April, when nearly the whole country was under lockdowns to slow the spread of the respiratory illness.
With applications for home loans surging to an 11-year high in recent weeks amid record low mortgage rates, May was probably the nadir for the existing housing market. Data last week showed a sharp rebound in building permits in May. But nearly 20 million people are unemployed and housing supply remains tight.
"Home sales may bounce with pent-up demand following the shutdown of the economy starting in March, but the massive scale of job losses and cautious consumers rebuilding their savings may limit sales," said Chris Rupkey, chief economist at MUFG in New York.
"There is still a long road to recovery for the broader economy," he said.
Existing home sales fell by 9.7 percent to a seasonally adjusted annual rate of 3.91 million units last month, the lowest level since October 2010. It was the third straight monthly drop. Economists polled by Reuters had forecast existing home sales would fall three percent to a rate of 4.12 million units in May.
Home resales, which make up about 90 percent of U.S. home sales, decreased by 26.6 percent on a year-on-year basis in May, the largest annual decline since 1982. There were 1.55 million previously owned homes on the market in May, down 18.8 percent from a year ago.
Stocks on Wall Street were trading higher as investors weighed stimulus-fueled recovery hopes against an increase in U.S. coronavirus infections. The PHLX housing index was little changed. The U.S. dollar fell against a basket of currencies. U.S. Treasury prices rose.
(Cover: A real estate sign advertising a new home for sale is pictured in Vienna, Virginia, U.S. /Reuters)
(REUTERS)
