Sales of previously owned U.S. homes climbed in May to the highest level since November 2009 and prices jumped, the National Association of Realtors said Thursday.
Purchases of existing houses increased 4.2 percent to an annualized rate of 5.18 million from 4.97 million in April. The median selling price surged from a year ago by the most since October 2005, the Realtors group said.
Rising home values and mortgage rates within a percentage point of all-time lows will help encourage Americans to put their properties on the market and trade up, economists say. The increase in wealth from housing is also bolstering confidence and sustaining consumer spending that will keep fueling the economy.
“The residential real-estate market in the U.S. is on fire,” said Brian Jones, senior U.S. economist in New York at Societe Generale, who projected a 5.17 million annual rate for home sales. “Ultimately, I think it’s a sign of confidence in the U.S. economy.”
Purchases of previously owned homes rose in all four regions, led by an 8 percent increase in the Midwest and a 4 percent gain in the South.
The median price of an existing home increased 15.4 percent from a year earlier to $208,000 last month, the highest since July 2008. The monthly gain was the biggest since October 2005, when the median surged a record 16.6 percent.
Thursday’s report also showed that foreclosures and other distressed sales accounted for 18 percent of the total, matching the lowest level since October 2008. First-time buyers accounted for 28 percent of purchases last month. They typically represent 40 percent to 45 percent of the market, according to the Realtors group.
Investors made up 18 percent, while all-cash transactions were 33 percent.
“The housing market is too good,” Lawrence Yun, chief economist at the Realtors group, said at a news conference as the figures were released. “It is breaking out again. It is being accompanied by an increase in home values. We do need to see a moderation of home price growth and that can only come from new supply.”
Housing starts need to increase to a 1.5 million annualized rate to help temper home-price gains, Yun said.
There were 2.22 million existing homes on the market in May, up from 2.15 million a month earlier, Thursday’s figures showed.
The supply fell to 5.1 months’ worth in May from 5.2 months. Listed inventory is 10.1 percent below a year ago.
For some builders such as Fort Worth-based D.R. Horton Inc., the lack of housing inventory has given them room to increase prices.
“For the very first time in many, many, many years, we have pricing power and a lot of that just deals with the lack of lots that are available in the marketplace for a lot of builders,” Donald Tomnitz, chief executive officer, said in a June 12 presentation. “The new home inventory, as you know, the number of months’ supply has decreased dramatically. And so we’re in a powerful position to continue to increase prices as we move forward.”
Sales of newly built houses picked up to a 460,000 annualized rate in May, the highest since July 2008, according to the median forecast in a Bloomberg survey of economists before a Tuesday Commerce Department report.
Housing starts climbed to a 914,000 pace, a Commerce Department report this week showed.
Existing-home sales are recovering after reaching a 13-year low of 4.11 million in 2008. The market peaked at a record 7.08 million in 2005. Information for this article was contributed by Ainhoa Goyeneche and Christopher Burritt of Bloomberg News.
Business, Pages 28 on 06/21/2013