Existing-home sales rose strongly in May and inventory gains continued to help moderate price growth, according to the National Association of Realtors®. All four regions of the country experienced sales gains compared to a month earlier.
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 4.9 percent to a seasonally adjusted annual rate of 4.89 million in May from an upwardly-revised 4.66 million in April, but remain 5.0 percent below the 5.15 million-unit level in May 2013. The 4.9 percent month-over-month gain in May was the highest monthly rise since August 2011 (5.5 percent).
Lawrence Yun, NAR chief economist, says current sales activity is rebounding after the lackluster first quarter. “Home buyers are benefiting from slower price growth due to the much-needed, rising inventory levels seen since the beginning of the year,” he says. “Moreover, sales were helped by the improving job market and the temporary but slight decline in mortgage rates.”
Total housing inventory at the end of May climbed 2.2 percent to 2.28 million existing homes available for sale, which represents a 5.6-month supply at the current sales pace, down slightly from 5.7 months in April. Unsold inventory is 6.0 percent higher than a year ago, when there were 2.15 million existing homes available for sale.
The median existing-home price for all housing types in May was $213,400, which is 5.1 percent above May 2013. “Rising inventory bodes well for slower price growth and greater affordability, but the amount of homes for sale is still modestly below a balanced market. Therefore, new home construction is still needed to keep prices and housing supply healthy in the long run,” Yun adds.
Earlier this month, NAR reported new home construction activity is currently insufficient in most of the U.S., and some states could face persistent housing shortages and affordability issues unless housing starts increase to match up with local job creation.
Distressed homes – foreclosures and short sales – accounted for 11 percent of May sales, down from 18 percent in May 2013. Eight percent of May sales were foreclosures and three percent were short sales. Foreclosures sold for an average discount of 18 percent below market value in May, while short sales were discounted 11 percent.
The percent share of first-time buyers continued to underperform, representing less than one-third of all buyers at 27 percent in May, down from 29 percent in April; they were 29 percent in April 2013.
According to Freddie Mac, thenational average commitment rate for a 30-year, conventional, fixed-rate mortgage dropped to 4.19 percent in May from 4.34 percent in April, and is the lowest since June 2013 (4.07 percent).
NAR President Steve Brown says housing fundamentals are showing slight improvement in markets across the country. “Many potential buyers were left on the sidelines beginning last summer as affordability declined amidst rising home prices and interest rates,” he says. “The temporary pause in rising interest rates and more homes for sale is good news – especially for first-time home buyers – who likely have a better chance in upcoming months to make a competitive offer that’s in return accepted by the seller.”
The median time on market for all homes was 47 days in May, down from 48 days in April; it was 41 days on market in May 2013. Short sales were on the market for a median of 125 days in May, while foreclosures typically sold in 57 days and non-distressed homes took 44 days. Forty-one percent of homes sold in May were on the market for less than a month.