Existing-Home Sales Heat Up in May

May’s homebuyers had more homes to choose from, but they may have had to pay more to get the home they wanted, as prices rose 5.1% last month.

Homebuyers battling tight inventory, tough lending standards, and competing offers from all-cash buyers got a bit of a break in May as more sellers put their homes on the market.

May’s 4.9% month-over-month gain in the number of single-family homes, townhomes, condominiums and co-ops for sale was the highest monthly rise since August 2011 (5.5%).

Despite that growth in the number of homes for sale, the median U.S. existing-home price continued to rise, reaching $213,400 in May. That’s up 5.1% from a year ago, data from the NATIONAL ASSOCIATION OF REALTORS® show.

NAR Chief Economist Lawrence Yun said current sales activity is rebounding after the lackluster first quarter. “Homebuyers are benefiting from slower price growth due to the much-needed, rising inventory levels seen since the beginning of the year,” he said. “Moreover, sales were helped by the improving job market and the temporary but slight decline in mortgage rates.”

Having more existing homes for sale might slow the pace at which home prices are rising, depending on how many new homes are built, said Yun. “The amount of homes for sale is still modestly below a balanced market. Therefore, new home construction is still needed to keep prices and housing supply healthy in the long run,” he added.

Earlier this month, NAR reported new-home construction activity is currently insufficient in most of the U.S. Some states could face persistent housing shortages and affordability issues unless housing starts increase to match up with local job creation.

At the current sales pace, it would take 5.6 months to sell the 2.28 million existing homes currently for sale. That’s down a bit from the 5.7-month supply of homes on the market last month. By comparison, there were 2.15 million existing homes for sale at this time last year.

Fewer Distressed Sales

The proportion of home sales involving distressed sellers (foreclosures or short sales) dropped quite a bit in May. Only 8% of May sales were foreclosures and 3% were short sales, where a home was sold for less than what was owed on the mortgage. Combined, the 11% of sales that were distressed last month is much lower than the 18% of sales that were distressed in April.

Distressed sales influence home sales prices. Foreclosures sold for an average discount of 18% below market value in May, while short sales were discounted 11%.

First-Time Buyers to Benefit from Larger Inventory

Housing fundamentals are showing slight improvement in markets across the country, said NAR President Steve Brown.

“Many potential buyers were left on the sidelines beginning last summer as affordability declined amidst rising home prices and interest rates,” he said. “The temporary pause in rising interest rates and more homes for sale is good news — especially for first-time homebuyers — who likely have a better chance in upcoming months to make a competitive offer that’s in return accepted by the seller.”

How Long are Homes Taking to Sell?

Home Type

Median Number of Days on the Market

All homes47 days
Short sales125 days
Foreclosures57 days
Non-distressed44 days

Forty-one percent of homes sold in May 2014 were on the market for less than a month.

Regional Existing-Home Sales

 May 2014 Sales VolumeMedian PriceMedian Price Compared to May 2013
NortheastUp 3.3%$256,700Down 0.9%
MidwestUp 8.7%$165,900Up 4.0%
SouthUp 5.7%$184,800Up 4.4%
WestUp 0.9%$297,500Up 8.4%

Existing condo and co-op sales remained unchanged in May from April (as well as from May 2013) at an annual rate of 590,000 units. The median existing-condo price was $212,300 in May, which is 6.6% higher than a year ago.