Existing-home sales rose in May to their highest pace in nearly six years, largely attributed to a big rise in the number of first-time home buyers, according to the National Association of REALTORS®' latest housing report, released Monday. All major regions saw sales increases in May, with the Northeast seeing the most notable rise.
Existing-home sales – measured as completed transactions of single-family homes, townhomes, condos, and co-ops – climbed 5.1 percent to a seasonally adjusted annual rate of 5.35 million in May. Sales are 9.2 percent above last year at this time.
The market share of first-time home buyers rose to 32 percent of transactions in May, matching the highest share since September 2012. A year ago, first-time buyers represented 27 percent of all buyers, NAR reports.
"The return of first-time buyers in May is an encouraging sign and is the result of multiple factors, including strong job gains among young adults, less expensive mortgage insurance and lenders offering low down payment programs," says Lawrence Yun, NAR's chief economist. "More first-time buyers are expected to enter the market in coming months, but the overall share climbing higher will depend on how fast rates and prices rise."
As the supply of homes remain tight, homes are selling fast and price growth in many markets continues to teeter at or near double-digit appreciation, Yun notes. "Without solid gains in new home construction, prices will likely stay elevated – even with higher mortgage rates above 4 percent," Yun says.
5 Stats to Gauge the Market
Here's an overview on key market conditions from NAR's latest existing-home sales report:
1. Inventory: Total housing inventory rose 3.2 percent to 2.29 million existing homes available for sale by the end of May. That is 1.8 percent higher than a year ago. Unsold inventory currently is at a 5.1-month supply at the current sales pace, down from 5.2 months in April.
2. Home prices: The median existing-home price for all housing types was $228,700 in May – nearly 8 percent above May 2014 home prices.
3. Days on the market: Properties typically stayed on the market for 40 days in May, up from 39 days in April. Still, that marks the third shortest time since NAR began tracking days on the market in May 2011. Forty-five percent of homes sold in May were on the market for less than a month.
4. All-cash sales: All-cash sales comprised 24 percent of transactions in May, down considerably from a year ago when they made up 32 percent of transactions. Individual investors, who account for the bulk of cash sales, purchased 14 percent of homes last month, down from 16 percent a year ago. Sixty-seven percent of investors paid cash in May.
5. Distressed sales: Foreclosures and short sales remained at 10 percent for the third consecutive month in May. Distressed sales are below the 11 percent share a year ago. Seven percent of May sales were foreclosures and 3 percent were short sales. Foreclosures sold for an average discount of 15 percent below market value in May while short sales were also discounted 16 percent.
Regional Breakdown
The following is a snapshot of how existing-home sales fared across the country in May:
- Northeast: existing-home sales rose 11.3 percent to an annual rate of 690,000. Sales are now 11.3 percent above a year ago. Median price: $269,000, up 4.8 percent above May 2014 levels.
- Midwest: existing-home sales rose 4.1 percent to an annual rate of 1.27 million in May. Sales are 12.4 percent above May 2014. Median price: $181,900, up 9.4 percent from a year ago.
- South: existing-home sales increased 4.3 percent to an annual rate of 2.18 million in May, and are 6.9 percent above year ago levels. Median price: $198,300, up 8.2 percent from a year ago.
- West: existing-home sales increased 4.3 percent to an annual rate of 1.21 million in May, and are 9 percent above a year ago. Median price: $324,000, up 10.2 percent above May 2014.
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