Existing-home sales improved for the second month in a row in May, up significantly from a year ago, while the median sales price continued to increase by double-digit rates from one-year prior, according to data from the National Association of Realtors.
Existing-home sales — completed transactions including single-family homes, townhomes, condominiums and co-ops — rose 4.2% to a seasonally adjusted rate of 5.18 million, up from 4.97 million in April. Last month’s numbers are 12.9% above the 4.59 million-unit pace in May 2012.
NAR Chief Economist Lawrence Yun said the recovery is strengthening and to expect limited housing supplies for the balance of the year in much of the country.
"The housing numbers are overwhelmingly positive. However, the number of available homes is unlikely to grow, despite a nice gain in May, unless new home construction ramps up quickly by an additional 50%," Yun said. "The home price growth is too fast, and only additional supply from new homebuilding can moderate future price growth."
The sales of existing homes have reached the highest level since November 2009, when the market skyrocketed to 5.44 million as buyers took advantage of tax stimulus.
For the past 23 months, sales have stayed above year-ago levels, while the national median price shows 15 consecutive months of year-over-year improvement.
The housing inventory crunch continued to lessen, as the total inventory at the end of May increased 3.3% to 2.22 million existing homes available for sale, representing a 5.1-month supply. This was down from 5.2 months in April and down from a 6.5-month supply a year ago.
The median home price for existing homes was $208,000 in May, a 15.4% increase from May 2012. For six straight months, the median existing-home price has seen double-digit increases and is the strongest price gain since October 2005, which jumped a record 16.6% from the year before.
Distressed homes — foreclosures and short sales — remained unchanged from April, accounting for 18% of May sales. However, this matches the lowest share since monthly tracking started in October 2008.
The national average commitment rate for a 30-year, conventional, fixed-rate mortgage jumped quickly from 3.45% in April to 3.54% in May. In May 2012, the rate was 3.80%.
NAR President Gary Thomas said market conditions today are significantly different than during the housing boom. "The boom period was marked by easy credit and overbuilding, but today we have tight mortgage credit and widespread shortages of homes for sale," he said.
Thomas added, "The issue now is pent-up demand and strong growth in the number of households, with buyer traffic 29% above a year ago, coinciding with several years of inadequate housing construction. These conditions are contributing to sustainable price growth."
"All regions show gains in the month in yet another detail that points to a very strong pivot higher for the housing market which really hit stride in this spring. Home sales and housing prices are living up to their billing as the year's key economic stories," added analysts at Econoday.