Fueled partly by an increase in the share of sales to first-time buyers, existing-home sales increased in May to their highest pace in nearly six years, according to the National Association of Realtors.
Led by the Northeast, all major regions experienced sales increases in May.
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 5.1% to a seasonally adjusted annual rate of 5.35 million in May from an upwardly revised 5.09 million in April. Sales have now increased year-over-year for eight consecutive months and are 9.2% above a year ago (4.90 million).
Last month, existing-home sales dropped 3.3% on a monthly basis.
“The overall economy is improving, and consumers are becoming increasingly aware that low rates won’t be around forever,” said Bill Banfield, vice president at Quicken Loans. “While this month’s report is encouraging for the housing market, bidding wars will continue to drive up prices if inventory doesn’t increase to a more healthy supply level in the coming months.”
Lawrence Yun, NAR chief economist, says May home sales rebounded strongly following April's decline and are now at their highest pace since November 2009 (5.44 million).
"Solid sales gains were seen throughout the country in May as more homeowners listed their home for sale and therefore provided greater choices for buyers," he said. "However, overall supply still remains tight, homes are selling fast and price growth in many markets continues to teeter at or near double-digit appreciation. Without solid gains in new home construction, prices will likely stay elevated — even with higher mortgage rates above 4%."
Total housing inventory at the end of May increased 3.2% to 2.29 million existing homes available for sale, and is 1.8% higher than a year ago (2.25 million). Unsold inventory is at a 5.1-month supply at the current sales pace, down from 5.2 months in April.
The median existing-home price for all housing types in May was $228,700, which is 7.9% above May 2014. This marks the 39th consecutive month of year-over-year price gains.
The percent share of first-time buyers rose to 32% in May, up from 30% in April and matching the highest share since September 2012. A year ago, first-time buyers represented 27% of all buyers.
"The return of first-time buyers in May is an encouraging sign and is the result of multiple factors, including strong job gains among young adults, less expensive mortgage insurance and lenders offering low downpayment programs," said Yun. "More first-time buyers are expected to enter the market in coming months, but the overall share climbing higher will depend on how fast rates and prices rise."
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage climbed in May to 3.84% from 3.67% in April but remained below 4.00% for the sixth straight month.”
With demand continuing to far exceed supply, properties typically stayed on the market for 40 days in May, up from April (39 days) but the third shortest time since NAR began tracking in May 2011. Short sales were on the market the longest at a median of 131 days in May, while foreclosures sold in 56 days and non-distressed homes took 38 days. Forty-five percent of homes sold in May were on the market for less than a month.
All-cash sales were 24% of transactions in May for the third straight month and are down considerably from a year ago (32%). Individual investors, who account for many cash sales, purchased 14% of homes in May, unchanged from last month and down from 16% in May 2014. Sixty-seven% of investors paid cash in May.
Distressed sales — foreclosures and short sales — remained at 10% for the third consecutive month in May and are below the 11% share a year ago. Seven% of May sales were foreclosures and 3% were short sales. Foreclosures sold for an average discount of 15% below market value in May (20% in April), while short sales were also discounted 16% (14% in April).
Single-family home sales jumped 5.6% to a seasonally adjusted annual rate of 4.73 million in May from 4.48 million in April, and are and now 9.7% above the 4.31 million pace a year ago. The median existing single-family home price was $230,300 in May, up 8.6% from May 2014.
Existing condominium and co-op sales increased 1.6% to a seasonally adjusted annual rate of 620,000 units in May from 610,000 units in April, and are 5.1% higher than May 2014 (590,000 units). The median existing condo price was $216,400 in May, which is 1.9% higher than a year ago.
May existing-home sales in the Northeast jumped 11.3% to an annual rate of 690,000, and are now 11.3% above a year ago. The median price in the Northeast was $269,000, which is 4.8% higher than May 2014.
In the Midwest, existing-home sales rose 4.1% to an annual rate of 1.27 million in May, and are 12.4% above May 2014. The median price in the Midwest was $181,900, up 9.4% from a year ago.
Existing-home sales in the South increased 4.3% to an annual rate of 2.18 million in May, and are 6.9% above May 2014. The median price in the South was $198,300, up 8.2% from a year ago.
Existing-home sales in the West climbed 4.3% to an annual rate of 1.21 million in May, and are 9.0% above a year ago. The median price in the West was $324,000, which is 10.2% above May 2014.