Sales of existing homes jumped 4.9% to a seasonally adjusted annual rate of 4.89 million for May, according to a National Association of Realtors, or NAR, report released Monday.
After edging up a revised 1.5% for April, analysts had expected sales to improve to a more subdued 4.75 million rate. Compared to May 2013, however, sales are still down 5%. The numbers include completed transactions on single-family homes, townhouses, condominiums, and co-ops.
In an especially welcome sign, housing inventory increased 2.2% to reach 2.28 million homes. Homebuilders have been hesitant to boost building rates back to pre-recession levels, turning the housing market recovery into a "supply squeeze" situation with high home prices and rising mortgage rates. As NAR Chief Economist Lawrence Yun noted in today's press release: "Home buyers are benefiting from slower price growth due to the much-needed, rising inventory levels seen since the beginning of the year. Moreover, sales were helped by the improving job market and the temporary but slight decline in mortgage rates."
NAR President Steve Brown added that "the temporary pause in rising interest rates and more homes for sale is good news -- especially for first-time home buyers -- who likely have a better chance in upcoming months to make a competitive offer that's in return accepted by the seller."
At the current sales rate and inventory, existing homes have a 5.6-month supply, according to the NAR. Compared to last year, supplies are up 6%.
Despite May's inventory expansion, the median sales price ($213,400) is still 5.1% above May 2013 levels. According to Yun, new home construction (which fell 6.5% for May, according to a federal report) is needed to keep price growth and inventories steadier.