The National Association of Realtors (NAR) reported sales of previously owned homes rose in May, citing falling mortgage rates as a reason the housing market may be heading in the right direction after a sluggish start.
According to the Friday report which appeared in the Wall Street Journal, sales rose 2.5% in May from the prior month to a seasonally adjusted annual rate of 5.34 million.
Spring is a bellwether time for the housing market because roughly 40% of the year’s sales take place in March through June. The NAR reports that May was the first month this spring when sales rose from the prior month. Compared with a year earlier sales in May, however, it still showed a 1.1% decline.
Speculation on the part of analysts is saying the housing market may be benefiting from growing economic uncertainty. With mortgage rates the lowest they have been in recent memory, home buyers jumping into the market now or those refinancing are taking advantage of savings on their monthly payments. To top that off, the Federal Reserve indicated recently that it might cut interest rates in the months ahead if an economic outlook is clouded by uncertainty over trade policy.
Most metropolitan areas to continue to see modest price and sales growth but some, such as San Jose, Calif., are more vulnerable to a downturn because prices have risen steeply. With all this, the construction sector has struggled. Housing starts fell in May from the prior month to a seasonally adjusted annual rate of 1.269 million, according to the Commerce Department, and U.S. home-builder confidence also dropped due to rising concerns over rising construction costs and trade issues.
According the report prices are continuing to rise faster than incomes, offsetting some of the additional buying power that consumers are getting from lower rates. The national median sale price for a previously owned home last month was $277,700, up 4.8% from a year earlier and the strongest monthly pace of growth since August 2018, the National Association of Realtors said Friday, June 21.
Inventory of homes for sale is continuing to increase with 1.92 million existing homes available for sale at the end of May, up 2.7% from a year earlier and a 4.3-month supply at the current sales pace.
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