Cooling Home Sales Bring Some Relief to Frenzied Housing Market

Don’t get us wrong – even though the typical May ramp-up in home sales didn’t happen last month and home prices were uncharacteristically flat, it’s still a seller’s world we’re all living in. At least in the 53 metros measured in the RE/MAX National Housing Report for May 2021, that is. Two other metrics, Months Supply of Inventory (the total number of residential properties listed for sale at the end of the month divided by the number of sales contracts signed during the month) and Days on Market (the number of days between when a home is first listed in an MLS and a sales contract is signed), set report-records, with Months Supply of Inventory dropping to 1.1 months and homes changing hands in a mere 28 days. Still, May data showed some respite from the history-making sales prices seen in recent months.

“The first small step toward a more balanced market may have appeared in May, as home prices finally stabilized after a long run of sustained increases. At the same time, cooling sales defied typical April-May trends and report records were set for low inventory and fast turnaround times,” says Nick Bailey, President of RE/MAX, LLC. 

Although still trailing behind the pace needed to rebalance supply and demand after years of underdevelopment, U.S. homebuilding rebounded in May – a hopeful sign inventory levels will improve by autumn. After months of intense competition, the notion that the housing market may have already hit its peak would be welcome news for homebuyers.

While not unusual to see a dip in sales in the torrid summer months after the typical hot spring selling season (nevermind anything that happened in 2020), the decrease in home sales and stabilization in prices may be early indicators that the market is de-escalating, perhaps in part due to homebuyer fatigue or reluctancy of sellers to list in fear they won’t find a new home (all problems a RE/MAX agent can help address, by the way). May 2021 home sales declined 0.2% month over month, in sharp contrast from the 13.9% 2015-2019 average gain from April to May. Year over year, sales were up 53.4%.

With all the talk about the benefits for sellers in recent years, Bailey feels these housing market conditions provide benefits on both sides of the equation.

“May had a little something for everyone – with buyers finally getting a break on prices, sellers benefiting from a lack of competitive inventory, and both sides served by speedier listing-to-contract periods. The market still tilts mainly toward sellers, but we could be seeing the first signs of a return to more balance after the hottest stretch of sales in years. Ultimately, that would be good for both buyers and sellers.”

Here’s the need-to-know data in the latest RE/MAX National Housing Report. Year-over-year comparisons are heavily skewed by the pandemic (catchphrase of 2021 thus far), so we’ve also listed April-to-May averages for 2015-2019 to show what is typical.

1. Sales Prices Stayed the Same

In May 2021, the median of all 53 metro Median Sales Prices was $320,000, flat to April 2021 compared to the typical April-to-May increase of 3.2%. Year over year, May’s price is 17.0% higher than May 2020’s $273,498. No metro areas saw a year-over-year decrease in Median Sales Price. Fifty metro areas increased year-over-year by double-digit percentages, led by Boise, ID at +40.7%, Augusta, ME at +37.8%, and Phoenix, AZ at +32.9%.

2. Homes Continued to Sell Faster

The average Days on Market for homes sold in May 2021 was 28, down four days from the average in April 2021, and down 18 days from the average in May 2020. The metro areas with the lowest Days on Market included a four-way tie between Boise, ID, Seattle, WA, Omaha, NE, and Nashville, TN at 12. The highest Days on Market averages were in Miami, FL at 85, Des Moines, IA at 83, and New York, NY at 79.

3. Demand Still Outweighed Supply

The number of homes for sale in May 2021 was down 7.1% from April 2021 and down 43.0% from May 2020. Instead of the 7.1% decline from April to May, inventory typically grows by 1.8%. Based on the rate of home sales in May 2021, the Months Supply of Inventory decreased to 1.1 compared to 1.3 in April 2021, and decreased compared to 2.9 in May 2020. A six months supply indicates a market balanced equally between buyers and sellers. In May 2021, of the 53 metro areas surveyed, zero metro areas reported a months supply at or over six, which is typically considered a buyer’s market. The markets with the lowest Months Supply of Inventory were a four-way tie between Albuquerque, NM, Raleigh-Durham, NC, Denver, CO, and Seattle, WA at 0.4.

If you’re looking to buy or sell this summer, a RE/MAX agent can provide help, information, guidance and expertise on all things related to real estate.

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