Sales up 1.8% in May to seasonally adjusted annual rate of 5.53 million, National Association of Realtors says
WASHINGTON—Sales of existing homes rose to their highest level in more than nine years and prices climbed to a new peak in May, the latest sign of rising demand amid steady job creation and low interest rates.
Sales climbed 1.8% in May from the prior month to a seasonally adjusted annual rate of 5.53 million, the National Association of Realtors said Wednesday. That was the strongest pace since February 2007. April’s sales figure was revised down to 5.43 million.
The national median sale price for a previously owned home, meanwhile, was $239,700, up 4.7% from a year earlier and the highest figure recorded by the Realtors’ group. Home prices are rising faster than wages across much of the U.S., potentially damping sales.
“Low inventory, especially for starter and tradeup homes, continues to stifle home sales activity,” said Ralph McLaughlin, chief economist at real estate website Trulia. “Finding a home is increasingly a challenge for both first and second-time homebuyers.”
Demand for homes has been especially strong as more Americans find work, wages edge higher and mortgage rates remain historically low. But home builders haven’t been keeping up, raising questions about future gains for the market.
Existing homes make up roughly 90% of the housing market while new-home sales account for the remaining share. In 2015, existing-home sales came in at a pace of 5.25 million, the highest level since 2006. NAR predicts the pace of existing-home sales to rise further this year. Before Wednesday’s release, the group was forecasting a 3% gain to 5.41 million.
The rejuvenated housing market has provided a boost to the economy, helping offset a slowdown in business spending and a downturn in the energy sector. Spending on home construction and remodeling grew at the fastest pace in more than three years at the start of 2016, helping support an otherwise anemic quarter.
“Housing demand is likely to remain solid in the coming months, underpinned by gradually strengthening wage growth and low mortgage rates,” said Gregory Daco, head of U.S. macroeconomics at Oxford Economics.
While the labor market posted its weakest monthly gain in more than five years in May, it continued a 75-month streak of private-sector job creation. Wages were up 2.5% from a year earlier.
A 30-year fixed-rate mortgage averaged 3.54% last week, down from 4% a year earlier, according to Freddie Mac. By comparison, rates averaged just over 6% during the 2001-2007 expansion.
“The most pressing need for the market is more supply. Builders are gearing up but not fast enough to balance the market,” said Stephen Stanley, chief economist at Amherst Pierpont Securities.
The Realtors’ group said there were 2.15 million existing homes available for sale at the end of May, down 5.7% from a year earlier. That is a 4.7-month supply at the current sales pace.