Economist Lawrence Yun Warns Home Prices Will Rise to Unacceptable Levels Unless Builders Substantially Increase New Home Production

Existing home sales rose 12.9 percent above a year ago according to the latest data from the National Association of Realtors. Sales of single-family homes, condominiums, townhomes and co-ops rose to a seasonally adjusted annual rate of 2.8 million in May. Lawrence Yun, NAR’s Chief Economist, noted, however, that overall inventory is unlikely to increase unless new home builders increase their rate of production by half. He also warned that prices would continue to rise at unacceptable levels unless available supply increased.

The national median existing home price rose 15.4 percent from one year ago to $208,000. This is the fifteenth straight month of year-over-year price increases. The median single-family home price was $208,700, up 15.8 percent from May of 2012, the largest year-over-year increase since October of 2005. The median home price (all types) in the West was up to $276,400, a 19.9 percent increase from the prior year.

NAR President Gary Thomas distinguished today’s market from the boom by noting both tight credit conditions and limited inventory compared to “easy credit and overbuilding.” He said, “The issue now is pent-up demand and strong growth in the number of households, with buyer traffic 29 percent above a year ago, coinciding with several years of inadequate housing construction.”

Distressed sales held steady, month-to-month at 20 percent of overall sales. Prices on those homes were usually discounted at 12 to 15 percent. Median time on the market was 41 days, in decline, and almost half the properties were on the market for less than a month. Cash sales were a third of all purchases with investors holding steady at 18 percent of all purchasers. At the end of May, the nation had 5.1 months’ supply of housing.

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