Existing home sales in the U.S. went up across all regions in May. There was improvement in inventory growth and slight price rise was also noticed - all indicating towards a better, stabilizing housing market.
According to the latest report by the National Association of Realtors, existing home sales went up 4.9 percent in May to a seasonally adjusted annual rate of 4.89 million. This was the highest month-on-month rise since August 2011.
There was a slight 2.2 percent increase in inventory as well, which is about 5.6-month supply rate as per current pace of sales. Median home prices were also up 5.1 percent in May, on a year-over-year basis.
"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," Lawrence Yun, chief economist at NAR, explained in a statement.
Yun also added that though the current parameters indicate a strengthening market, supply needs to pick up for other factors to hold steady.
"Rising inventory bodes well for slower price growth and greater affordability, but the amount of homes for sale is still modestly below a balanced market. Therefore, new home construction is still needed to keep prices and housing supply healthy in the long run," Yun added.
NAR also revealed that first-time home buyers underperformed in May as they accounted for just one-third (27 percent) of the total percentage of home buyers, down from 29 percent in April. Experts attribute the fall in affordability to higher interest rates and prices.
Though mortgage rates are still at record lows, they have been mapping a northward journey from the past two weeks. The recent Freddie Mac survey revealed that the average 30-year fixed mortgage rates ticked up to 4.20 percent from last week's 4.14 percent.
Another report by John D. and Catherine T. MacArthur Foundation and carried out by Hart Research Associates revealed that more than half of the Americans (52 percent) have made major sacrifices to own a home. Especially with rising prices, affording a home has become a very difficult.
Industry bigwigs said that while the recovery is now "choppy", a good boost in supply would solve the affordability problem.
Though construction activity fell 6.5 percent in May, builder confidence for the housing market is high and they believe that the coming few months will see a rise in supply.
"After several months of little fluctuation, a four-point uptick in builder sentiment is a welcome sign and shows some renewed confidence in the industry," NAHB Chairman Kevin Kelly said in a statement.
