Existing home sales increased in May, a sign some experts say shows the strength of homebuyer demand.
One expert explained that buying conditions in many markets have put sellers in complete control and buyers are forced to contend with rising competition.
“The fact that sales of existing homes rose in May, despite incredibly limited selection, shrinking times on market and rapidly rising prices, is a testament to just how strong the draw to homeownership is right now for millions of Americans,” Zillow Chief Economist Svenja Gudell said. “It's no exaggeration to say that current buying conditions in many markets are terrible, with sellers in complete control and buyers forced to contend with cutthroat competition and intense pressure to make a deal.”
“Still, despite these notable challenges, buyers are finding ways to make things work and continue to come out in droves,” Gudell said. “As long as the economy continues to chug along as it has, I see no reason for this widespread demand to fall off, nor for the pendulum to meaningfully swing back in favor of buyers, any time soon.”
Other experts agree the rate of housing inventory is holding back home sales. As the demand for housing grows each month, inventory becomes even more limited.
“Persistently low inventory continues to dominate the sluggish existing home sales narrative,” Trulia Senior Economist Cheryl Young said. “The rate of existing home sales, however, is one of the highest since the crisis.”
“Facing low inventory and high prices but strong demand, homebuyers are leaving a smaller share of existing home inventory on the market each month,” Young said.
This chart shows the share of inventory sold since 1999:
Click to Enlarge
One expert explained that the mismatch between what borrowers want and the supply available is hitting Millennials the hardest as they seek to enter the housing market.
This is a strong market for sellers, which is good news for people who are downsizing or settling an estate. It’s bad news for Millennials, first-time buyers or second-time buyers looking to upsize for that baby on the way.
“On the supply side, new homes are predominantly being built for the mid to upper price range,” realtor.com Senior Economist Joseph Kirchner said. “On the demand side, buyers are increasingly seeking low to moderately priced homes. This mismatch is having an impact on the sales among affordable homes.”