Home prices rose to a six-year high last month, signaling the U.S. housing recovery is starting to pick up momentum.
Existing home sales came in at an annualized rate of 5.35 million units in May—their highest since November 2009. This is a 5.1% increase from April’s upwardly revised 5.09 million, and a 9.2% increase year-over-year. So far, existing home sales have been increasing year-over-year for eight consecutive months. (Source: National Association of Realtors, June 22, 2015.)
Inventories have increased. At the end of May, housing inventory totaled 2.29 million units, 3.2% higher compared to April. At the current sales pace, unsold inventory equates to 5.1 months of supply, slightly lower than the 5.2 months in April.
Moreover, there were more first-time buyers in May. The percentage of first-time buyers increased to 32% in May from 30% in April. May’s reading was also the highest since September 2012.
Lawrence Yun, Chief Economist at the National Association of Realtors, considers the increasing share of first-time buyers an encouraging sign. He accredits the rise of first-time buyers to job gains among young adults, less expensive mortgage insurance, and lower down payments required by lenders. For the near future, Yun expects more first-time buyers to enter the market. He also mentions, “the overall share climbing higher will depend on how fast rates and prices rise.”
The price boom in the U.S. housing market continued its momentum into the month of May. The median price for existing homes was $228,700, 7.9% higher compared to the same period last year. Notably, price increases have been continuing for 39 consecutive months.
More home buyers are relying on mortgages. In May, all-cash sales accounted for only 24% of transactions, down significantly from the 32% a year ago.
Both single-family homes and condominiums gained momentum. At an annualized rate of 4.73 million units, sales of single-family homes increased an impressive 5.6% from April, and 9.7% year-over-year. Condominium and co-op sales in May gained a more moderate 1.6% compared to April, to 5.1% year-over-year.
Yun is quite positive on the future outlook of the U.S. housing market, “Without solid gains in new home construction, prices will likely stay elevated—even with higher mortgage rates above four percent.”