Existing home sales showed their highest pace in nearly six years in May and resumes it momentum after an unexpected decline in April. Sales rose 5.1 percent to a seasonally adjusted annual rate of 5.35 million pre-constructed homes, condos and co-ops last month, compared to April’s showing of 5.09 million as reported by the National Association of Realtors this week. The report bet housing economists’ expectations of 5.25 million.
The median price for existing homes was $228,700 in May, which is up 7.9 percent from a year ago and marking the 39th straight month of year-over-year price gains.
The jump in sales was due largely in part by first-time home buyers and an expanded supply of houses, according to the real estate trade group. Thirty-two percent of home buyers in May came from first time and up five percentage points from a year ago. That’s a welcomed sign for the housing market, as we historically have seen first time home buyers making up about 40 to 45 percent of the total market.
We can only hope that the housing market will continue to keep up momentum over the peak home buying season, but millennial home buyers continue to face hurtles with a lack luster labor market, income growth and they continue to be challenged with rapid price increases. On top of rising prices and competitive bidding, an interest rate hike by the Federal Reserve later in the year could lead to higher mortgage rates.
Total housing inventory also increased 3.2 percent from April to 2.29 million homes for sale and up 1.8 percent from a year ago, but the total supply is only at about a 4.5 month supply and we need a 6.0 month supply to see a balance market to reduce pressure on home price increases
Solid sales gains were seen throughout the country last month, as more home owners listed their home for sale and sales are now at their highest pace since November 2009.
May was also and improvement from April, when sales took an unexpected declined of 3.3 percent and 3.7 percent decline for single-family homes. Many housing economist feel April’s sales decline was due largely in part to higher prices, but demand for houses continue to outpace supply, which indicates we’ll see a continuation of accelerated home prices in the coming months.
May’s report shows a significant rebound in single-family homes in the Northeastern section of the U.S. Single-family home sales were up 5.6 percent from last month, with condos and co-ops increasing modestly at 1.6 percent. Overall, sales of existing homes in the Northeast surged 11.3 percent, compared to gains of just above 4 percent for the Midwest, South and West.
There was a 5.1 month inventory of unsold houses in May, down from 5.2 months in April and below the 6-month supply considered “balanced” by economists with average listing times on average of 40 days in May, while the average listing time for April was 39 days and a fast turn-time by historical measures.
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