Existing home sales jumped in May to their highest increase in almost 10 years, according to a recent report by the National Association of Realtors.
While existing home sales may have jumped, the high demand and lagging home prices caused the median sales prices to also shoot up to an all-time high, according to NAR.
In fact, all regions except for the Midwest saw strong sales increases in May.
Total existing home sales, or completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased by 1.8% to a seasonally adjusted annual rate of 5.53 million in May. This is up from April’s 5.43 million.
After this gain, sales now increased to 4.5% from last year’s 5.29 million and are at their highest annual pace since February of 2007. This is the third consecutive month of rising sales, according to NAR Chief Economist Lawrence Yun.
“This spring’s sustained period of ultra-low mortgage rates has certainly been a worthy incentive to buy a home, but the primary driver in the increase in sales is more homeowners realizing the equity they’ve accumulated in recent years and finally deciding to trade-up or downsize,” Yun said.
“With first-time buyers still struggling to enter the market, repeat buyers using the proceeds from the sale of their previous home as their down payment are making up the bulk of home purchases right now,” he added.
Although home prices are up, they are not yet at pre-recession levels.
“May’s existing home sales numbers suggest that healthy demand continues to support a recovering housing market, but that inventory woes are preventing a full recovery to pre-recession levels,” said Trulia Chief Economist Ralph McLaughlin. Trulia is an online real estate listing service.
Some insist that the increase in existing home sales holds little good news.
“It's encouraging to see another month of growth, the third in a row, in today's May existing home sales report,” according to Svenja Gudell, chief economist for the real estate listing service Zillow. “But beyond that, it offers buyers little good news to grasp onto.”
“Inventory, while up very modestly from April largely thanks to more condos coming up for sale, is still well below a year ago,” Gudell said. “And the time homes spend on the market has fallen by a week in just one month, to 32 days, making an already hyper-competitive market even more so.”
“Buyers struggling to find an affordable home to buy will continue to do so, even given these very small improvements,” he continued.
Median home prices peaked last June at $236,300, but increased to $239,700 in May. This is an annual increase of 4.7% in home prices, and marks to 51st consecutive month of year-over-year increases.
“Barring further deceleration in job growth that could ultimately temper demand from these repeat buyers, sales have the potential to mostly maintain their current pace through the summer,” Yun said.
While total housing inventory rose 1.4% from last month to 2.15 million existing homes available for sale, it is still down 5.7% from last year, according to NAR.
“Existing inventory remains subdued throughout much of the country and continues to lag even last year’s deficient amount,” Yun said. “While new home construction has thankfully crept higher so far this year, there’s still a glaring need for even more, to help alleviate the supply pressures that are severely limiting choices and pushing prices out of reach for plenty of prospective first-time buyers.”
Not everyone, however, agrees that lack of inventory is as big of a problem for starter homes. In most markets, the lack of inventory for starter homes causes prices to rise, however, there are some notable exceptions to this rule, according to a recent report by Trulia.
On the other hand, looking through the eyes of those in the heart of the industry, the majority of mortgage professionals expect the first-time homebuyer market share to only get better, making it the industry’s job to now ensure they’re getting served.