A pickup in sales of previously owned homes signals the housing market is making progress despite inventory constraints that are sending prices to all-time highs, a report from the National Association of Realtors showed Wednesday.
Contract closings rose 1.1% to a 5.62 million annual rate (the estimate 5.55 million) from a revised 5.56 million the prior month. Median sales price rose 5.8% year over year to a record $252,800. Inventory of available properties fell 8.4% from May 2016 to 1.96 million, the 24th straight year-over-year decline.
Wages have been steadily increasing, unemployment is at a 16-year low and Americans are feeling confident about the economy, factors that support continued demand for housing. Mortgage rates are also near historically low levels after erasing a post-election surge. At the same time, buyers are limited by inventory shortages that have kept property prices rising faster than worker pay.
There's little sign that any supply rebound is in the pipeline. Construction starts for new homes have declined for three straight months and permits were at a one-year low in May, according to government data. The increase in sales for previously owned properties contrasts with an 11% drop in April for new-home sales, which account for about a tenth of the market. Figures for May will be released on Friday.
"It is a very fast-moving market, meaning that homes placed on the market are being picked up very fast by buyers," Lawrence Yun, NAR's chief economist, said at a press briefing in Washington. "We have job creation, yet home creation is not breaking out. There's sizable pent-up demand."
May sales rose in three of four regions; up 6.8% in the Northeast and down 5.9% in the Midwest. At the current pace, it would take 4.2 months to sell the homes on the market, compared with 4.1 months in April and 4.7 months in May 2016; the Realtors group considers less than a five-month supply as consistent with a tight market.
Single-family home sales increased 1% last month to an annual rate of 4.98 million. Purchases of condominium and co-op units rose 1.6% to a 640,000 pace. First-time buyers accounted for 33% of all sales in May, down from 34% in the prior month. Homes sold in 27 days, the fastest since the group started tracking the data in 2011; down from 29 days in April.
