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US Existing Home Sales Surge in May: NAR

H.S. Borji
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US Existing Home Sales Surge in May: NAR

The sale of previously-owned US homes increased sharply in May, partially offsetting concerns the housing recovery would be slow to materialize after a volatile first quarter.

Existing US home sales rose 4.9 percent to an annual rate of 4.89 million, following an upwardly revised gain of 1.5 percent the prior month, the National Association of Realtors reported today. The increase was well above forecasts, which called for a 2.2 percent gain.

All four regions of the US experienced sales growth in May, NAR data showed.

“Home buyers are benefiting from slower price growth due to the much-needed, rising inventory levels seen since the beginning of the year,” said NAR chief economist Lawrence Yun in a press release. “Moreover, sales were helped by the improving job market and the temporary but slight decline in mortgage rates.”

May marked only the third increase in sales in ten months. Severe weather weighed heavily on the housing recovery this winter. Home sales dropped 5.1 percent in January, 0.4 percent in February and 0.2 percent in March.

Previously-owned home sales had fallen to a 20-month low in March.

Severe weather accentuated existing weakness in the housing sector brought on by higher mortgage rates and rising house costs. With mortgage rates expected to go up in the next 12 months, the strength of the housing recovery will depend largely on improvements in the labour market.

The US economy has added an average of 234,000 nonfarm payrolls the past three months.

NAR’s report on pending home sales last month indicated mortgage rates are likely to rise to 5.5 percent next year, putting more emphasis on income growth to drive the next phase of the housing recovery.

Average earnings increased 0.2 percent in May following no growth the previous month.

Despite the temporary slowdown in price growth, house prices continue to trend well above where they were a year ago. The median price for previously owned homes in May was $213,400, which is 5.1 percent higher than May 2013.

“Rising inventory bodes well for the slower price growth and greater affordability, but the amount of homes for sale is still modestly below a balanced market,” Yun also added. “Therefore, new home construction is still needed to keep prices and housing supply healthy in the long run.

Data from the Commerce Department last week raised concern the housing recovery may still need more time to regain momentum. Building permits – a gauge of residential construction intentions – tumbled 6.4 percent in May to a seasonally adjusted annual pace of 991,000. Meanwhile, housing starts tumbled 6.5 percent to a seasonally adjusted pace of just over 1 million.

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