It is what’s known in the trade as a “seller’s market”.
The average price of a previously owned home in the United States crossed $350,000 for the first time ever in May, surging 23.6 percent from a year earlier, the National Association of Realtors (NAR) said on Tuesday.
Every region of the country registered price increases in sales of existing homes last month, marking 111 consecutive months of year-over-year gains dating back to 2012.
Last month’s home price milestone was driven by an ongoing mismatch in supply and demand, and is symptomatic of rising wealth and income inequality as the nation’s economy continues to heal from last year’s COVID blow.
The market is awash in house hunters who kept working during the pandemic and saw their wealth increase from a rising stock market, helping them amass down payments. Near-zero interest rates designed to shore up the nation’s labour market have also led to historically low mortgage rates, which people are keen to lock-in.
That has put sellers in the driver’s seat as eager home buyers vie for what is available. But that imbalance of power has also kept some would-be buyers on the sidelines, waiting for some of the heat to come off of the nation’s red-hot housing market.
Sidelined home buyers combined with a shortage of inventory help explain why the number of existing homes sold fell 0.9 percent in May from April, marking the fourth straight month of decline. But compared with the same time a year ago, sales were up 44.6 percent.
“Home sales fell moderately in May and are now approaching pre-pandemic activity,” said Lawrence Yun, NAR’s chief economist in a press release. “Lack of inventory continues to be the overwhelming factor holding back home sales, but falling affordability is simply squeezing some first-time buyers out of the market.”
First-time buyers were responsible for 31 percent of existing home sales in May, while individual investors or second-home buyers were responsible for 17 percent.
In a signal that big, institutional investors looking to snap up properties and rent them out at a profit are still active in the market – all-cash sales last month represented 23 percent of transactions. That was down from 25 percent the month before but up 17 percent from the same period a year ago.
Total housing inventory at the end of May stood at 1.23 million units, up 7 percent from April’s inventory but down 20.6 percent from a year earlier.