Home Prices Growing "Too Fast;" More Homebuilding Needed -NAR

Sales of existing homes rose again inrnMay and prices posted the biggest annual gain in eight years thernNational Association of Realtors®rn(NAR) said today. Total existing home sales were at arnseasonally adjusted annual rate of 5.18 million units in May, 4.2rnpercent above the 4.97 million unit pace reported for April and 12.9rnpercent more than in May 2012 when the annual rate was 4.59 millionrnunits. </p

Sales have now risen compared tornyear-earlier figures for 23 months and May was the best market for existing home sales since November 2009 during the tax stimulus whenrnsales jumped to 5.44 million. Existing home sales include completedrntransactions of single family homes, townhomes, condominiums, andrncooperative apartments. </p

Single-family home sales rose 5.0 percent to a seasonally adjustedrnannual rate of 4.60 million in May from 4.38 million in April, andrnare 12.7 percent higher than the 4.08 million-unit pace in May 2012. rn Existing condominium and co-op sales slipped 1.7 percent to anrnannualized rate of 580,000 units in May from 590,000 in April, butrnare 13.7 percent above the 510,000-unit level a year ago.  </p

The national median price for all existing housing type wasrn$208,000 in May, a 15.4 percent increase over May 2012. The nationalrnmedian price has now risen for 15 consecutive months on arnyear-over-year basis; the last time this happened was from March 2005rnto May 2006. May was the sixth straight month that those annualrnincreases have been in double digits and May’s was also the strongestrnprice gain since October 2005 when median prices jumped 16.6 percentrnfrom a year earlier, the largest increase ever recorded by NAR. .</p

Lawrence Yun, NAR chief economist, said the recovery isrnstrengthening and to expect limited housing supplies for the balancernof the year in much of the country.  “The housing numbers arernoverwhelmingly positive.  However, the number of available homesrnis unlikely to grow, despite a nice gain in May, unless new homernconstruction ramps up quickly by an additional 50 percent,” hernsaid.  “The home price growth is too fast, and only additionalrnsupply from new homebuilding can moderate future price growth.”</p

The median existing single-family homernprice was $208,700 in May, up 15.8 percent above a year ago, and alsornthe strongest increase since October 2005 when it jumped 16.9 percentrnfrom a year earlier. The median existing condo price was $202,100rnin May, which is 11.8 percent above May 2012.</p

Foreclosures accounted for 11 percent of May Sales and 7 percentrnwere short sales. These sold at an average discount of 15 percentrnand 12 percent respectively compared to market sales. The aggregaternof distressed sales, 18 percent, was unchanged from April and, withrnApril the lowest share since NAR began tracking the metric in Octoberrn2008. One year ago distressed home sales had a 25 percent marketrnshare. The lower share of distressed sales account for some of thernhome price gain, NAR said.</p

All-cash sales rose slightly in May, from 32 percent of sales inrnApril to 33 percent. Investor purchases were 18 percent of salesrncompared to 19 percent in April and first-time buyers accounted forrn28 percent of purchases compared to 29 percent the previous month. </p

Total housing inventory at the end of May rose 3.3 percent to 2.22rnmillion existing homes available for sale, which represents arn5.1-month supply² at the current sales pace, down from 5.2rnmonths in April.  Listed inventory is 10.1 percent below a yearrnago, when there was a 6.5-month supply.</p

NAR President Gary Thomas said market conditions today are vastlyrndifferent than during the housing boom.  “The boom period wasrnmarked by easy credit and overbuilding, but today we have tightrnmortgage credit and widespread shortages of homes for sale,” hernsaid.</p

“The issue now is pent-up demand and strong growth in the numberrnof households, with buyer traffic 29 percent above a year ago,rncoinciding with several years of inadequate housing construction. rnThese conditions are contributing to sustainable price growth,”rnThomas said.</p

Marketing time continues to drop, requiring a median time of 41rndays in May compared to 46 days in April and 72 days in May 2012. This marketing period is nearing the shortest selling period NAR hasrnrecorded – 4 weeks in both 2004 and 2005. Short sales were on thernmarket for a median of 79 days, while foreclosures typically sold inrn43 days and non-distressed homes took 39 days. Forty-five percentrnof all homes sold in May were on the market for less than a month. rn</p

Regionally, existing-home sales in the Northeast rose 1.6 percentrnto an annual rate of 650,000 in May and are 8.3 percent above Mayrn2012.  The median price in the Northeast was $269,600, up 12.3rnpercent from a year ago.</p

Existing-home sales in the Midwest jumped 8.0 percent in May to arnpace of 1.21 million, and are 16.3 percent higher than a year ago. rnThe median price in the Midwest was $159,800, up 8.2 percent from Mayrn2012.</p

In the South, existing-home sales rose 4.0 percent to an annualrnlevel of 2.09 million in May and are 16.1 percent above May 2012. rnThe median price in the South was $183,300, which is 15.0 percentrnabove a year ago.</p

Existing-home sales in the West increased 2.5 percent to a pace ofrn1.23 million in May and are 7.0 percent above a year ago.  Withrnthe tightest regional supply, the median price in the West wasrn$276,400, up 19.9 percent from May 2012.

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