The strong home resales added to retail sales data in painting an upbeat picture of the economy. That should help allay the fears that were stoked by last month’s paltry job gains. The higher existing-home sales suggest an increase in brokers’ commissions, which should bolster the residential investment portion of the gross domestic product report. Housing is being driven by an increase in the formation of households as some young adults find employment and older Americans move into smaller and cheaper homes.
Existing-home sales surged 4.1 percent in the Northeast and rose 4.6 percent in the South. Sales in the West, where house prices have increased sharply because inventory is tight, jumped 5.4 percent. In the Midwest, sales tumbled 6.5 percent last month. The decline, however, came after recent hefty gains.
The number of unsold homes on the market in May rose 1.4 percent from April to 2.15 million units. Supply, however, was down 5.7 percent from a year ago. In May, new listings typically stayed on the market for 32 days, the shortest period since the association started tracking the data. In April, it was 39 days, and a year ago, it was 40 days. At May’s sales pace, clearing the stock of houses on the market would take 4.7 months, unchanged from April. A six-month supply is viewed as a healthy balance between supply and demand.
Economists say builders will need to increase the construction of homes to meet the pent-up demand.
With inventory still tight, the median house price rose 4.7 percent from a year ago to a high of $239,700 last month. The rise in house prices is outstripping wage gains. While that could make buying a home expensive for first-time buyers, it is increasing equity for homeowners and enticing some to put their homes on the market.
Last month, the share of first-time buyers fell to 30 percent from 32 percent in both April and a year ago.
Article is courtesy of: https://www.nytimes.com/2016/06/23/business/economy/existing-home-sales-surged-in-may-reaching-9-year-high.html