Sales of previously owned homes surged in May to the highest level since late 2009 as prices rose, inventories remained tight and contracts closed at a brisk pace, offering the latest signs of a strengthening housing recovery.
Existing-home sales rose 4.2% in May from a month earlier to a seasonally adjusted annual rate of 5.18 million, the National Association of Realtors said Thursday. That is the highest figure since November 2009, when a tax credit was expiring, and was 12.9% above the same month a year earlier.
The results beat expectations. Economists surveyed by Dow Jones Newswires had forecast sales would rise by 0.6% to a pace of 5.0 million. April's figures were unrevised at a rate of 4.97 million.
Home prices continued their rise, with the median price of homes sold in May at $208,000, up 15.4% from a year earlier. That marks the highest price since July 2008.The stock of homes sold is improving as well, with the percentage of sales that were in foreclosure or other distressed properties staying at 18%, the lowest level since the group began tracking the data in October 2008.
Lawrence Yun, the Realtors' chief economist, cautioned that the sharp rise in home prices isn't sustainable given that housing prices are rising at a double-digit pace while Americans' incomes are rising only tepidly.
"The home-price growth is too fast, and only additional supply from new home building can moderate future price growth," he said. New home construction needs to increase by at least 50% "very quickly," he added.
Thursday's report offered the latest optimistic signs for the housing-market recovery since the depths of the bust. Federal Reserve Chairman Ben Bernanke pointed to the sector's gains in construction jobs, rising home prices and increased household wealth as key to the central bank's more upbeat overall economic forecast released on Wednesday.
"While levels are still low, housing is now the strongest part of the economy in growth terms," said Jim O'Sullivan, chief U.S. economist with High Frequency Economics.
The number of homes listed for sale rose for the fourth straight month as the spring selling season got under way.
The inventory of previously owned homes listed for sale at the end of May increased 3.3% to 2.2 million properties, down 10.1% from year-ago levels. That represented a 5.1-month supply at the current sales pace, down from 5.2 months in April. Tightened inventories could encourage home builders to break ground on new properties, which could in turn spark the economy.
Thursday's report comes on the heels of home builders reporting earlier this week the best home-sales conditions in June since the mid-2000s housing boom levels, according to the National Association of Home Builders.
The Realtors group said that for the first time traditional homes sold at a quicker pace than homes in foreclosure since they began tracking sales. Homes were on the market a median of 41 days, with non-distressed homes selling after 39 days.
The housing market is one of the main drivers of the economic recovery as potential buyers' sentiment improves, interest rates remain low and prices are still below their peak. Rising mortgage rates are pushing up the cost of buying a home, but not at a rate substantial enough to derail any sort of recovery, economists have said. Residential investments have contributed to overall economic growth for two years.
Existing-home sales hit their peak in September 2005, when homes sold at a 7.26-million pace. At their lowest monthly point in July 2010, the sales pace was less than half that.
The readings are in line with other advances in the housing sector. In May, overall housing starts rose 6.8%, driven by construction of apartment buildings. Still, building permits for single-family homes-a measure of future demand-rose to its highest level since May 2008.
The Realtors' report showed existing home sales rose in all four U.S. regions compared with a month earlier.