More Americans bought homes in May, a sign of economic strength that is pushing up average prices.
The National Association of Realtors announced this morning that sales of existing homes climbed 5.1% last month to a seasonally adjusted annual rate of 5.35 million. May was the third consecutive month of the sales rate exceeding 5 million homes, putting home-buying on pace for its best year since 2007.
Solid hiring since 2014 and relatively low mortgage rates have stirred up demand and helped generate more first-time buyers, though rising sales have fueled spiking prices because relatively few properties are listed for sale.
“We can credit that to the stronger job market, a more confident consumer” and some additional listings in an otherwise tight market, says Jennifer Lee, a senior economist at BMO Capital Markets.
Some of the buying might also reflect a rush to capture the benefits of lower interest rates and relatively cheap prices that are jumping higher each month.
“There may be some anticipation of prices going even higher, which is sparking a move off the sidelines,” Lee adds.
Median home prices climbed 7.9% over the past 12 months to $228,700, about $1,700 shy of the July 2006 peak. The market has just 5.1 months’ supply of homes, versus an average of six months in a healthy market.
Economists say that the sales gains of recent months could be short-lived if prices increase so sharply that buyers are priced out of the market. The recent rise in mortgage rates could also curtail sales, similar to the higher mortgage rates slashing into sales in the middle of 2013.
