According to data from the National Association of REALTORS®, sales of existing homes increased in May to reach their highest pace for nearly 6 years. This increase is at least partly due to greater numbers of first-time buyers.
All major regions saw sales increase in May with the Northeast registering the greatest differences. The total number of existing home sales which is for completed transactions of co-ops, condominiums, townhouses and single-family homes increased by 5.1%, reaching a seasonally adjusted annual rate of 5.35 million four May. The annual rate of sales has now increased for eight consecutive months and is 9.2% higher compared to a year earlier.
The article in RisMedia points out that home sales for May increased strongly following declines in April and are now at their highest levels seen since November 2009. During May greater numbers of homeowners listed their properties for sale, providing buyers with a greater choice. In spite of this the overall supply does remain constrained, particularly as homes are selling quite quickly and price growth in some markets is near to double digits. It’s likely that unless more new homes are constructed, prices will continue to stay high even though mortgage rates are currently above 4%.
Housing inventory for May increased by 3.2% to reach 2.29 million existing homes for sale. This is 1.8% higher than a year earlier. The amount of unsold inventory is currently at a 5.1 month supply, slightly down compared to 5.2 months in April. In general the economy is improving and potential buyers are becoming aware that low interest rates cannot last forever. Experts feel that while this month’s report is encouraging news for the property market, real estate prices will still be driven up by bidding wars unless inventory levels increase over the next few months.
The median price for existing homes was $228,700 in May, 7.9% higher compared to May last year. This is also the 39th consecutive month of annual price gains. The percentage of first-time buyers increased to 32% in May compared to 30% in April. This is the highest percentage seen since September 2012 and is considerably higher than a year earlier when first-time buyers represented 27% of purchasers.
The increase in the number of first-time buyers is particularly encouraging and is due to a number of different factors including cheaper mortgage insurance, lenders offering lower down payment programs and increased job opportunities. It is expected that more first-time buyers will enter the market during the next few months, depending on how quickly property prices increase.