U.S. sales of previously occupied homes surpassed the 5 million-a-year mark in May, the first time that's happened in more than three years. The pace gain shows the housing recovery is strengthening.
Home resales rose 4.2% in May to a seasonally adjusted annual rate of 5.18 million, the National Association of Realtors said Thursday.
Sales last exceeded 5 million in November 2009. Then and in October 2009, a home buyer tax credit inflated the pace. Before, sales hadn't topped 5 million since July 2007.
House Prices Hike
The sales pace is still below the 5.5 million of a healthy market, but is up 13% year over year. With a tight supply of homes for sale, the median sales price rose to $208,000, the highest since July 2008.
"Housing is now the strongest part of the economy in growth terms," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics.
The housing recovery looks more sustainable and should keep boosting economic growth this year, offsetting some drag from higher taxes and federal spending cuts.
Steady hiring and low mortgage rates have encouraged more people to buy. With demand up, prices rising and few homes for sale, builders have grown more optimistic, leading to more construction and jobs.
Sales of previously occupied homes rose last month in every region of the country: 8% in the Midwest, 4% in the South, 2.5% in the West and 1.6% in the Northeast.
The supply of homes for sales also grew, a sign that more owners are confident they can lure buyers. The number of homes on the market rose 3.3% in May to 2.22 million. I nventories are 10% below a year ago.
A critical part of the market remains weak. First-time buyers represented only 28% of buyers in May vs. 34% a year earlier and vs. more normal levels above 40%. The drop in first-time rs suggests many young Americans can't get financing.
Wednesday, Federal Reserve Chairman Ben Bernanke cited the housing gains as a big reason the Fed's economic outlook has brightened. Still, mortgage rates have jumped and are apt to rise more now that the Fed has signaled plans to scale back bond purchases if the economy continues to strengthen.