Existing home sales increased 5.1 percent in May to their highest pace in nearly six years, according to the National Association of Realtors (NAR), which they credit in part to an increase in the share of sales to first-time buyers. Sales have now risen year-over-year for eight consecutive months and are now 9.2 percent above a year ago. All major regions saw sales increases in May, most notably in the Northeast.
NAR Chief Economist, Dr. Lawrence Yun, noted, “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 percent. ”
Inventory, home prices, DOM all rose in May
Housing inventory rose 3.2 percent in May, and unsold inventory is at a 5.1-month supply at the current sales pace. The median existing-home price for all housing types in May was $228,700, which is 7.9 percent above May 2014. NAR reports that this marks the 39th consecutive month of year-over-year price gains.
The national average days on market for May is 40 days (up from April’s 39 days), but marking the third shortest time since NAR began tracking this data 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. Fully 45 percent of homes sold in May were on the market for less than a month.
Return of the first-time buyer
The percent share of first-time buyers rose to 32 percent in May, up from 30 percent in April and matching the highest share since September 2012. A year ago, first-time buyers represented 27 percent 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 Dr. 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.”
Other report highlights
- All-cash sales were 24 percent of transactions in May for the third straight month and are down considerably from a year ago (32 percent).
- Individual investors, who account for many cash sales, purchased 14 percent of homes in May, unchanged from last month and down from 16 percent in May 2014. Sixty-seven percent of investors paid cash in May.
- Distressed sales remained at 10 percent for the third consecutive month in May and are below the 11 percent share a year ago.
- Seven percent of May sales were foreclosures and 3 percent were short sales.
- Foreclosures sold for an average discount of 15 percent below market value in May (20 percent in April), while short sales were also discounted 16 percent (14 percent in April).
- Single-family home sales jumped 5.6 percent to a seasonally adjusted annual rate of 4.73 million in May from 4.48 million in April, and are and now 9.7 percent above the 4.31 million pace a year ago.
- The median existing single-family home price was $230,300 in May, up 8.6 percent from May 2014.
- May existing-home sales in the Northeast jumped 11.3 percent to an annual rate of 690,000, and are now 11.3 percent above a year ago. The median price in the Northeast was $269,000, which is 4.8 percent higher than May 2014.
- In the Midwest, existing-home sales rose 4.1 percent to an annual rate of 1.27 million in May, and are 12.4 percent above May 2014. The median price in the Midwest was $181,900, up 9.4 percent from a year ago.
- Existing-home sales in the South increased 4.3 percent to an annual rate of 2.18 million in May, and are 6.9 percent above May 2014. The median price in the South was $198,300, up 8.2 percent from a year ago.
- Existing-home sales in the West climbed 4.3 percent to an annual rate of 1.21 million in May, and are 9.0 percent above a year ago. The median price in the West was $324,000, which is 10.2 percent above May 2014.