Sales of previously owned U.S. homes increased in May, a sign of solid demand during the housing market's spring selling season despite fast-rising prices and tight inventory.
Existing-home sales rose 1.1% in May from the prior month to a seasonally adjusted annual rate of 5.62 million, the National Association of Realtors said Wednesday.
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Economists surveyed by The Wall Street Journal had expected a 0.5% decline to a 5.54 million annual pace; April sales were revised down slightly.
Compared with a year earlier, sales were up 2.7% in May.
Lawrence Yun, the trade group's chief economist, said despite the latest sales uptick, a lack of available homes has continued to drive too-rapid price growth. "We have a housing shortage," Mr. Yun said.
The median sale price in May was $252,800, the highest on record and up 5.8% from a year earlier. There was a 4.2 month-supply of homes on the market at the end of the month, based on the current sales pace. Inventory has declined on a year-over-year basis for 24 straight months.
The median property remained on the market just 27 days in May, the shortest time since the Realtors group began tracking the metric six years ago.
"Right now we're in a true seller's market," said Mark Trenka, owner of Century 21 Trenka Real Estate in Denver. He said a home in the city was brought onto the market Saturday, saw 30 showings and attracted 10 offers in one day, and was under contract Sunday.
Colorado's unemployment rate was a record-low 2.3% in May, according to the Labor Department. That, together with low inventory, is helping drive a "really competitive" environment, Mr. Trenka said.
Purchases of previously owned homes account for roughly 90% of U.S. home-buying activity. Sales of newly built single-family homes dropped in April after three straight monthly rises, though economists expect the Commerce Department on Friday will report new-home sales rose 3.7% in May.
Several factors are working to support buyers. The national unemployment rate in May was 4.3%, its lowest level since 2001. The economy continued to expand and add jobs in the first half of 2017, and gauges of household confidence remain elevated.
Mortgage rates rose after last year's presidential election but edged down in recent months. The average interest rate on a 30-year fixed-rate mortgage was 4.01% in May, down from 4.05% in April, according to Freddie Mac.
Still, the limited supply of available houses is driving rapid growth for home prices and deterring some would-be buyers as the pace of new construction has lagged. Housing starts were up 3.2% in the first five months of 2017 compared with a year earlier, slowing from 5.6% growth in all of 2016.
"We know builders have not caught up with the market," Mr. Trenka said. "We're not getting enough product."
That could change if builders ramp up production in response to stronger demand. Miami-based home builder Lennar Corp. on Tuesday reported its new orders were up about 12% on the year in the three months ended May 31, and the dollar value of new orders rose roughly 17% from a year earlier.
"The slow and steady, though sometimes erratic, market improvement that we have seen for the entirety of this recovery continues to seem to be giving way to a more definitive reversion to normal," Chief Executive Stuart Miller told analysts.
News Corp, owner of The Wall Street Journal, also operates Realtor.com under license from the National Association of Realtors.
The National Association of Realtors' latest report on existing-home sales can be accessed at: https://www.nar.realtor/topics/existing-home-sales
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(END) Dow Jones Newswires
June 21, 2017 10:15 ET (14:15 GMT)