Sales of existing homes increased 4.2% to a seasonally adjusted annual rate of 5.18 million for May, according to a National Association of Realtors (NAR) report released today.

Not only do these newest numbers tack on another month of positive gains to April's 0.6% increase, they also exceeded analysts' expectations of a 5-million-home annual rate. The May rate is 12.9% above the May 2012 number.

But while May's report may be reason to celebrate, a "housing squeeze" may be on the horizon. "The housing numbers are overwhelmingly positive," said NAR Chief Economist Lawrence Yun in a statement today. "However, the number of available homes is unlikely to grow, despite a nice gain in May, unless new home construction ramps up quickly by an additional 50 percent. The home price growth is too fast, and only additional supply from new homebuilding can moderate future price growth."

The national median home price hit $208,000 in May, a 15.4% increase over May 2012's amount and the strongest price gain since October 2005. Total home supply remained relatively unchanged, clocking in at a 5.1-month supply with 2.22 million homes for sale. Compared to a year ago, listed inventories have fallen 10.1%. 

Buyer traffic is up 29% year-over-year, and 45% of homes sold were on the market for less than a month. According to NAR President Gary Thomas, "The issue now is pent-up demand and strong growth in the number of households."


You can follow Justin Loiseau on Twitter @TMFJLo and on Motley Fool CAPS @TMFJLo.

Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.