U.S. Existing-Home Sales Increase 5.1% in May

WASHINGTON—Sales of previously owned homes surged in May, buoyed in part by the return of younger buyers who had long struggled to find a path into the market. The pace of existing home sales increased 5.1% last month from April to a seasonally adjusted rate of 5.35 million, the National Association of Realtors said Monday. Sales for April were revised up to 5.09 million from an initially reported 5.04 million. Economists surveyed by The Wall Street Journal had expected May sales would increase 4.2% to a pace of 5.25 million. Sales in May hit their strongest pace since November 2009. “We’re moving back toward a more normal housing market,” said Stephen Stanley, chief economist at Amherst Pierpont Securities. Economists pointed to the return of first-time home buyers, who have largely been missing from much of the recovery, as evidence the housing market is starting to look more like it did in the early 2000s before a huge boom and bust. First-time buyers increased to 32% of all buyers from 27% at this time last year, NAR reported. Historically, first-time home buyers made up around 40% of the market. Meaningful price and sales growth are unlikely without new buyers. Growth in the housing market matters for the economy overall because homeowners typically invest in everything from washing machines to lawn mowers and use their homes to finance other big purchases. “If you take first-time buyers out of the equation, then all you’re doing is shuffling deck chairs around,” Mr. Stanley said. Bill Banfield, vice president at Quicken Loans, said the lender has seen a significant uptick in inquiries from first-time home buyers. While saving for a down payment continues to be a struggle for younger buyers, he pointed to loans backed by the Department of Veterans Affairs and Federal Housing Administration that require less cash up front. Still, the recovery has been too uneven for economists to think for certain that the housing market is on solid ground. Sales unexpectedly fell in April before recovering last month. One major issue is a continued shortage of both new and existing inventory that is pushing up prices and driving potential buyers away. Sales of existing homes account for roughly 90% of all purchases in the U.S. At the current pace of sales, it would take 5.1 months to exhaust the supply of homes on the market, NAR said Monday. Total housing inventory at the end of May increased 3.2% to 2.29 million existing homes available for sale. News Corp, owner of The Wall Street Journal, also owns Move Inc., which operates a website and mobile products for the NAR. The median sale price for a previously owned home was up 7.9% to $228,700 from a year earlier in May. The price was slightly below the monthly peak reached in July 2006, when the median sales price for the year was $230,400. The Realtors’ association has been saying the median sales price in 2015 could surpass that peak. ”It’s not normal because there are a few misalignments,” said Lawrence Yun, NAR’s chief economist. “What is misaligned is the supply is not catching up with demand and prices are rising too fast.” U.S. builders are poised to ramp up construction this summer, which ultimately could help address the inventory shortage. Permits to build new homes surged 12% last month to an annual rate of 1.275 million, the highest since August 2007, the Commerce Department said Tuesday. Real-estate agents in some markets said the lack of supply has kept some buyers out of the market and caused others to scale down their expectations. “Two years ago, buyers who wanted to buy a single-family house…they are now OK purchasing a townhome or a duplex or a condominium,” said Jordan Clarke, a Redfin agent in San Diego. “Prices have increased so much during that short little period that they switched their expectations in the middle of a purchase process.” Write to Laura Kusisto at laura.kusisto@wsj.com This article was originally published on The Wall Street Journal