Home Prices Rose in May as Supply Fell Short of Demand

U.S. home prices rose in May as a limited supply of properties for sale failed to meet demand from first-time buyers.

Prices climbed 0.4% on a seasonally adjusted basis from April, the Federal Housing Finance Agency said in a report Wednesday. That matched the average estimate of 18 economists, according to data compiled by Bloomberg.

More young people have been striking out on their own, leaving their parents’ homes or apartments shared with roommates as the job market improves, according to Blerina Uruci, U.S. economist for Barclays Capital Inc. That’s created a bigger pool of potential buyers who have helped push up prices by competing for a tight inventory of listings.

“Today we’re seeing a strong demand for homes, with home sales increasing at a very strong rate,” Uruci said in an interview before the FHFA’s report. “The stock of housing is just not increasing at the same rate of household formation.”

First-time buyers accounted for 32% of existing-home purchases in May, up from 27% a year earlier, data from the National Association of Realtors show.

The FHFA’s report showed home prices rose 5.7% in May from a year earlier. The measure is 1.8% below its March 2007 peak and about the same as the April 2006 level.

Prices rose from a year earlier in all regions. The biggest gain was in the Pacific area, including Washington, Oregon and California, at 8.4%. The Middle Atlantic region of New York, New Jersey and Pennsylvania had the smallest increase, at 0.9%.

The index measures transactions for single-family properties financed with mortgages owned or securitized by Fannie Mae and Freddie Mac. It doesn’t provide specific prices. The median price for a home in May was $228,700, according to the Realtors group.