WASHINGTON (Reuters) - U.S. home sales dropped to their lowest level in more than 9-1/2 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 National Association of Realtors said on Monday existing home sales fell 9.7% to a seasonally adjusted annual rate of 3.91 million units last month, the lowest level since October 2010. Last month’s sales reflected closings of contracts signed in March and April. Economists polled by Reuters had forecast existing home sales would fall 3% to a rate of 4.12 million units in May.
Existing home sales, which make up about 90% of U.S. home sales, decreased 26.6% on a year-on-year basis in May, the largest annual decline since 1982.
May was probably the nadir for the existing housing market, with applications for home loans surging to an 11-year high in recent weeks amid record low mortgage rates. Data last week showed a sharp rebound in building permits in May.
Though businesses have reopened after being shuttered in mid-March to control the spread of COVID-19, nearly 20 million people are unemployed. In addition, the supply of homes available for sale is still tight, indicating a strong housing market recovery is unlikely.
Last month’s slump in home sales, together with a modest rise in homebuilding in May, suggested a decline in residential investment this quarter after it grew at its fastest rate in more than seven years in the first quarter.
Home sales last month declined in all four U.S. regions.
There were 1.55 million previously owned homes on the market in May, down 18.8% from a year ago. The median existing house price rose 2.3% from a year ago to $284,600 in May. That was the smallest gain since February 2012.
At May’s sales pace, it would take 4.8 months to exhaust the current inventory, up from 4.3 months a year ago. A six-to-seven-month supply is viewed as a healthy balance between supply and demand.
Reporting by Lucia Mutikani; Editing by Paul Simao