The REALTORS® Confidence Index (RCI) survey[1] gathers monthly information from REALTORS® about local real estate market conditions, characteristics of buyers and sellers, and issues affecting homeownership and real estate transactions.[2] This report presents key results about market transactions from May 2018. View and download the full report here.

Market Conditions and Expectations

• The REALTORS® Buyer Traffic Index registered at 73 (74 in May 2017).[3]
• The REALTORS® Seller Traffic Index registered at 44 (46 in May 2017).
• The REALTORS® Confidence Index—Six–Month Outlook Current Conditions registered at 72 for detached single-family, 59 for townhome, and 57 for condominium properties. An index above 50 indicates market conditions are expected to improve.
• Properties were typically on the market for 26 days (27 days in May 2017).
• Eighty-eight percent of respondents reported that home prices remained constant or rose in May 2018 compared to levels one year ago (90 percent in May 2017).

Characteristics of Buyers and Sellers

• First-time buyers accounted for 31 percent of sales (33 percent in May 2017).
• Vacation and investment buyers comprised 15 percent of sales (16 percent in May 2017).
• Sales of distressed properties (foreclosed or sold as a short sale) accounted for 3 percent of sales (5 percent in May 2017).
• Cash sales made up 21 percent of sales (22 percent in May 2017).
• Seventeen percent of sellers offered incentives such as paying for providing a warranty (9 percent), closing costs (6 percent), and undertaking remodeling (2 percent).[4]

Issues Affecting Buyers and Sellers

• From March–May 2018, 76 percent of contracts settled on time (76 percent in May 2017).
• Among sales that closed in May 2018, 77 percent had contract contingencies. The most common contingencies pertained to home inspection (58 percent), obtaining financing (45 percent), and getting an acceptable appraisal (44 percent).
• REALTORS® report “low inventory”, “interest rates”, and “multiple offers” as the major issues affecting transactions in May 2018.

About the RCI Survey

• The RCI Survey gathers information from REALTORS® about local market conditions based on their client interactions and the characteristics of their most recent sales for the month.
• The May 2018 survey was sent to 50,000 REALTORS® who were selected from NAR’s 1.3 million members through simple random sampling and to 7,495 respondents in the previous three surveys who provided their email addresses.
• There were 4,169 respondents to the online survey which ran from June 1-12, 2018. The survey’s overall margin of error at the 95 percent confidence level is one percent. The margins of error for subgroups and sample proportions of below or above 50 percent are larger.
• NAR weighs the responses by a factor that aligns the sample distribution of responses to the distribution of NAR membership.

The REALTORS® Confidence Index is provided by NAR solely for use as a reference. Resale of any part of this data is prohibited without NAR’s prior written consent. For questions on this report or to purchase the RCI series, please email: Data@realtors.org

[1] Thanks to George Ratiu, Managing Director, Housing and Commercial Research and Gay Cororaton, Research Economist for their data analysis and comments to the RCI Report.

[2] Respondents report on the most recent characteristics of their most recent sale for the month.

[3] An index greater than 50 means more respondents reported conditions as “strong” compared to one year ago than “weak.” An index of 50 indicates a balance of respondents

who viewed conditions as “strong” or “weak.”

[4] The difference in the sum of percentages to the total percentage of sellers who offered incentives is due to rounding.

The median sales price of all existing homes sold rose to its highest level in May 2018, to $264,800. This peak price exceeds the housing bubble peak of $230,400 in July 2006. The median sales price of existing homes sold has been trending up (on a year-on-year basis) in the past 75 months since March 2012. This also represents a 71 percent nominal increase from its lowest level in January 2012 of $154,600. However, netting out the effect of inflation, the May 2018 inflation-adjusted median home sales price is at $172,928. This is still 11 percent lower than the inflation-adjusted peak price of $193,781 in June 2005. On an inflation-adjusted basis, home prices have increased 58 percent since February 2012.

An inflation-adjusted measure of house prices provides useful information for both current homeowners and for homebuyers. For current homeowners, a desirable situation is one where home prices are appreciating at a faster rate than inflation, so that they get a positive real return. For homebuyers, a desirable situation is one where home prices are not appreciating too far off from the overall increase in prices (inflation), so that households are not forced to make significant adjustments to their spending behavior just to purchase a home. Moreover, home prices should not be appreciating too far ahead of the rate of increase in income (which is also tied to some extent to inflation), which makes a home purchase unaffordable.

The median sales price of existing homes sold at the nominal and inflation-adjusted levels are still rising, but the pace of appreciation has slowed compared to the double-digit growth rates in October 2012‒ January 2013. Although the May 2018 nominal median home price of $264,800 is a new high, this represents a modest appreciation of 4.9 percent (year-on-year basis) compared to the average price appreciation of 8.5 percent during the bubble period and the 7.0 percent average during this current recovery period.  The inflation-adjusted median home price rose by 2.0 percent in May 2018, also a slower pace of appreciation compared to the 5.7 percent average during the housing bubble period and the 5.5 percent average during this recovery period. This indicates that, nationally, the real estate market during this recovery period has not overheated to the same intensity as that of housing bubble period of January 2012–July 2006.

The pace of price appreciation has started to taper off as home prices have become less affordable, along with interest rates on the rise. Home prices have been rising at a faster pace than income, making a home purchase less affordable.  As of 2017, the median sales price of existing homes was up 40 percent compared to the annual average in 2012, while incomes (measured by weekly earnings) were up by only 12 percent.

Interest rates are still at historically low levels, though they are on the rise, as monetary policy is expected to tighten in response to rising inflation.  The 30-year fixed-rate mortgage has increased to 4.62 percent during the week of June 14 compared to 3.91 percent nearly one year ago. A one-percentage point increase in mortgage rates increases the monthly mortgage by $119 (or $1,426 annually) for a borrower making a 20 percent down payment and by $143 for a borrower making a 3.5 percent down payment (or $1,720 annually). For some borrowers, this additional cost can mean the difference between buying or renting.

In summary, nominal home prices are above the peak seen during the bubble years, but the inflation-adjusted price is still below the housing bubble peak. Moreover, while home prices are still increasing, the pace of price appreciation is slowing, as demand is adjusting to the higher price and rising mortgage rates. The trends indicate that the pace of price appreciation during the current recovery period is not likely to reach the intensity of the housing bubble period on a national scale.