The total number of home sold increased to 5.34 million in May, which is a decline of 1.1% from a year ago.
“The purchasing power to buy a home has been bolstered by falling mortgage rates, and buyers are responding,” said Lawrene Yun, Chief Economist at the NAR.
According to the report, the median existing home price for all housing types in May increased 4.8% to $277,700, and is also the 87th straight month of year-over-year gains.
May’s housing inventory increased to 1.92 million, up from 1.83 million in April, and a 2.7% increase from last year. Unsold inventory is at 4.3-months supply, which is a slight increase from April’s 4.2-months supply.
Housing supply remains at historic lows, according to the NAR, and Yun said “solid demand along with inadequate inventory of affordable homes” have caused home prices to rise.
A factor in the low supply figures, according to the First American Financial Corp., is that the housing market is entering an unprecedented “homebody era,” with homeowners staying in their homes for record times.
“Before the housing market crash in 2007, the average length of time someone lived in their home was approximately five years. Average tenure length jumped to seven years during the aftermath of the housing market crisis between 2008 and 2016,” said Mark Fleming, Chief Economist at First American. “The most recent data shows that the average length of time someone lives in their home reached 11.3 years in May 2019, a 10% increase compared with a year ago.”
Fleming added that the 30-year fixed rate mortgage has fallen to its lowest point since January 2018, and many homeowners don’t have an incentive to sell.
“Two trends are driving the increase in tenure length. The majority of existing homeowners have mortgages with historically low rates, so there is limited incentive to sell if it will cost them more each month to borrow the same amount of money from the bank,” said Fleming. “While mortgage rates have come down compared with last year, they are still below the 3.5% mortgage rates of 2016.
“The second trend influencing tenure is seniors aging in place. A recent study from Freddie Mac shows that if seniors and adults born between 1931-1959 behaved like earlier generations, nearly 1.6 million housing units would have come to market by 2018. Improvements in healthcare and technology have made ageing in place easier, which has meant fewer homes on the market.”