By Gino Blefari, President and CEO, Intero Real Estate Services, Inc.
Have consumers in the market to buy a home already missed the boat? That’s the question on a lot of peoples’ minds as we dive into monthly sales statistics that keep painting an intensifying picture: more sales, more price increases, rising interest rates and fewer available homes for sale.
Existing-home sales increased 4.2% in May from April to an adjusted annual rate of 5.18 million homes, according to the most recent report from the National Association of Realtors. The number of sales was up 12.9% from the same month a year ago, when the annual rate stood at 4.59 million homes.
At the same time, the national median price of existing homes was $208,000, marking the sixth straight month of double-digit increases and the strongest price gain since October of 2005. May home prices were 15.4% above what they were a year ago.
Good news, right? Yes, but even the national Realtor group is warning that the current pace of growth is unsustainable. This is mainly because the supply of homes remains a big issue in many markets across the country. And as NAR’s chief economist notes, with people’s incomes rising only about 1-2% on average, and prices rising in double digits, there’s a threshold to how much buyers can pay.
The total inventory of available homes for sale rose 3.3% in May to 2.22 million. But the inventory represents a 5.1-month supply at the current sales pace, down from 5.2 months in April and 6.5 months during the same month a year ago.
The market for foreclosures and short sales has retracted a bit from a year ago, accounting for 18% of May sales, compared with 25% a year ago. And rates on long-term mortgages indeed are rising, though many believe not enough to single-handedly derail the recovery. The average rate on a 30-year conventional fixed-rate mortgage rose to 3.54% in May from 3.45% in April. However, as of today it is has risen to 4.625%! It was 3.8% a year ago – a clear sign that we have bottomed out.
While the latest statistics don’t necessarily mean that buyers have missed the boat, they definitely point to a rising tide in our recovery. As long as the job market improves and home building reaches a healthy pace, we should maintain good conditions in the near term. But many buyers will want to move quickly to take advantage of rates and prices before they continue to climb rapidly.