Existing home sales forecast to decline for the fourth consecutive month



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Strong buyer demand and the scarcity of homes for sale have fueled a highly competitive housing market. Two reports slated for release this week will offer clues to the nation’s housing supply, home prices and sales as the summer months approach.

A May home sales gauge, expected at 10 a.m. Tuesday, is expected to show a decline in existing home buying activity for the fourth consecutive month. The seasonally adjusted annual rate of existing home sales, as measured by the National Association of Realtors, is expected to fall to 5.70 million in May, from 5.85 million in April, according to consensus estimates gathered by FactSet. That would be 2.9% below last month’s reading, but still 42.1% above 2020 levels and 5.4% above the same month in 2019.

Forecasters likely took their cue from the National Association of Realtors’ pending home sales index, which fell 4.4% month-over-month in April. The report, which measures homes under contract that have yet to close, may foreshadow existing home sales figures in the coming months.

In a statement released last month, National Association of Realtors chief economist Lawrence Yun attributed April’s drop to “a lack of sufficient supply of affordable housing.” Earlier this month, the trade group released a report from the Rosen Consulting Group, which estimates that between 5.5 million and 6.8 million new homes are needed to meet demand.

The next preview on new home construction will be on Wednesday when the Census Bureau releases its new home sales report. Economists polled by FactSet expect the seasonally adjusted annual rate of new home sales to rise to 867,500 from 863,000 in April. Although such a result is lower than the levels observed earlier this year, it would represent the fastest new home sales rate for the month of May since 2006.

New home construction picked up in May, but not as quickly as the FactSet consensus had expected, according to census data released last week. The seasonally adjusted annual rate of housing starts rose 3.6% from April and 50.3% more than the same month last year. Permits, which may indicate future housing starts, fell 3% from the April rate, the Census Bureau reported.

Builder confidence, as measured by the National Association of Home Builders, fell in May on fears of rising material costs and lower availability.

Write to Shaina Mishkin at [email protected]


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