May Housing Market Sets Records for Speed and Competition
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U.S. home prices rose 6.8 percent to a median sale price of $288,000 in May, according to national realtor Redfin. Home sales increased 7.5 percent over last year, despite a long-standing shortage in the supply of homes. The number of homes for sale fell 10.9 percent, leaving just 2.7 months of supply, the lowest supply Redfin has recorded since we began tracking the market in 2010. Six months is generally considered a market balanced between buyers and sellers.
The typical home that sold in May went under contract in 37 days, breaking the previous record of 40 days set in April. More than a quarter of homes sold above their list price, the highest percentage Redfin has recorded. The median sale-to-list price ratio set another record, hitting 95.4 percent in May.
(Read the full report here.)
“There is still a lot of momentum in home prices in many metros, not only on the coasts but also in places like Buffalo, Grand Rapids and Omaha,” said Redfin chief economist Nela Richardson. “Strong local economic growth and burgeoning demand from older millennials are accelerating home-price growth in this very competitive, low-inventory pre-summer market. The Federal Reserve’s latest announcement to raise short-term rates will have very little effect on buyer demand or on the overall housing market. If anything, it may motivate buyers to make their purchases sooner rather than later.”
In a Redfin-commissioned survey conducted last month, more than 1,000 homebuyers responded to a question about the effect a hypothetical rate hike above 5 percent would have on their home-buying plans. A quarter said it would have no impact, while nearly as many (23%) said they would increase their urgency to buy before rates went up further. Twenty-nine percent said they would slow down their search and see if rates came back down, 18 percent said their urgency wouldn’t change, but they would look in other areas or buy a smaller home. Just 5 percent said they would cancel their home-buying plans altogether.