Weak Housing Markets? Latest Data Shows Lack of Supply!

Ben Bernanke, Federal Reserve Chairman

Existing-home sales declined 1.5 percent to a seasonally adjusted annual rate of 4.55 million in May from 4.62 million in April, according to the National Association of Realtors. These figures are 9.6 percent above the 4.15 million-unit pace in May 2011.

Existing-home sales include single-family homes, town-homes, condominiums and co-ops. According to Lawrence Yun, NAR chief economist, “The slight pullback in monthly home sales is more likely due to supply constraints rather than softening demand.” In plain-speak, there are not sufficient homes available to sell!

Total housing inventory at the end of May slipped 0.4 percent to 2.49 million existing homes available for sale and the national median existing-home price for all housing types rose 7.9 percent to $182,600 in May from a year ago.

Housing, especially the lower priced housing, is turning out to be a relatively bright spot amid the gloomy macroeconomic backdrop. Whether this is because of Bernanke’s extraordinary measures to prop the housing market is debatable; nonetheless, the average 30- year fixed mortgage rates have been hitting record lows around 3.66 percent.

Even as the country experiences high unemployment rate and slow growth rate, there has been a severe shortage in lower priced homes in much of the country except the Northeast, data from the NAR shows.This scenario is clearly logical, as consumers adjust to an elongated period of weak recovery and high unemployment they might want to buy lesser priced homes than they would have bought in an otherwise optimistic outlook.

Stocks of Home Builders like Toll Brothers (TOL) and Lennar Corp (LEN) were down slightly in afternoon trade.