Existing home sales plummeted in May as the coronavirus continued to hammer the economy, but Realtors expect that it will represent the bottom.

Sales of existing homes in May fell 9.7% compared with April, to a seasonally adjusted annualized rate of 3.91 million units, according to the National Association of Realtors. Sales were down 26.6% annually. That is the largest annual decline since 1982, when interest rates were about 18%. It is also the slowest sales pace since October 2010.

These numbers are based on closed sales, representing contracts signed in March and April. Given that those months saw the worst of the economic shutdown from the coronavirus, it is not surprising that the volume came in so low.

“Well into the month of June, I think people are much more relaxed, knowing that there is a massive stimulus package in the economy,” said Lawrence Yun, chief economist for the Realtors. “I am very confident that this will be the cyclical low point. Buyers are coming back and listings are coming back.”

The meager supply of homes for sale didn’t help either, as not only did potential sellers decide to wait, but some already on the market pulled their listings. Inventories nationally fell 18.8% compared with May 2019. At the current sales pace, it would take 4.8 months to exhaust the inventory. Supply was lower across all price points.

Tight supply kept pressure on home prices. The median price of an existing home sold in May was $284,600. That is an increase of 2.3% compared with May 2019 and the smallest annual rise since February 2012, when the market had just begun to recover from the Great Recession. It may be due, in part, to a shift in the mix of sales. Lower-priced homes sold at a much stronger pace, while sales were sharply lower at the high end of the market. 

“There is evidence that homebuyers came back in big numbers in May,” said Danielle Hale, chief economist for realtor.com. “However, these buyers are now confronting a familiar challenge – not enough homes for sale. Fortunately, shifting preferences and behaviors favoring the suburbs may better enable builders to build and buyers to find what they’re looking for.” 

The nation’s homebuilders appear to be benefiting from the lack of existing homes for sale. An index measuring homebuilder sentiment took a major leap in June, back into positive territory, after plunging in April, according to the National Association of Home Builders.

Builders have reported increases in both sales and buyer traffic, even though some of that traffic is online and virtual.

There continues to be a large divergence between single-family homes and condominiums. Single-family home sales fell 9.4% month to month, while condominium sales were down 12.8%.

Regionally, existing home sales in the Northeast fell 13% for the month and 29.9% from a year ago. The median price in the Northeast was $327,900, up 7.8% from May 2019.

Sales decreased 10% in the Midwest, down 20.2% from a year ago. The median price in the Midwest was $227,400, a 3% increase from May 2019.

Sales in the South dropped 8% for the month and 25.1% from the same time one year ago. The median price in the South was $247,400, a 2.1% increase from a year ago.

Sales in the West fell 11.1% monthly and 35.1% annually. The median price in the West was $408,400, down 0.2% from May 2019.