Existing home sales bounced up at the highest pace in nearly six years in May, resuming improvement in the housing market after an unexpected decline in April. Sales rose 5.1% to a seasonally adjusted annual rate of 5.35 million pre-constructed homes, condos and co-ops last month, up from April’s 5.09 million, the National Association of Realtors (NAR) said Monday.
That was above economists’ expectations of 5.25 million, based on a Bloomberg survey. The median price for existing homes was $228,700 in May, up 7.9% from a year ago, marking the 39th straight month of year-over-year price gains. The jump in sales was due to an increase in homes bought by first-time homebuyers and an expanded supply of houses, according to the real estate trade group. Thirty-two percent of homebuyers in May were purchasing a home for the first time, up five percentage points from a year ago. That’s after Fannie Mae and Freddie Mac introduced policy changes to help young people buy their first homes, said Patrick Newport and Stephanie Karol, economists at research firm IHS Global Insight.
Total housing inventory also increased 3.2% from April, to 2.29 million homes for sale, up 1.8% from a year ago. “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,” said Lawrence Yun, NAR chief economist. Sales are now at their highest pace since November 2009. The May numbers show an improvement from April, when sales declined 3.3%, with a 3.7% slide in single-family homes. April sales dipped due to higher prices, economists said, with demand for houses outpacing supply and driving up sticker prices.
May’s rebound was reflected in a comeback in single-family homes and a buying spree in the Northeastern U.S. Single-family home sales were up 5.6% from a month ago, with condos and co-ops rising a modest 1.6% for the month. And sales of existing homes in the Northeast surged 11.3%, compared to gains of just above 4% for the Midwest, South and West. The housing market should continue to keep up momentum in the next few months thanks to more new homebuyers created by an improved labor market and income growth, said economists with Nomura Bank in a research note. That said, there are still potential challenges for first-time buyers in the second half of 2015 as prices continue to rise and the market remains competitive for buyers, with homes still selling quickly.