First-time buyers represented 32 percent of the market in May, a 2 percent increase from April and a 5 percent increase from a year ago. First-time buyers haven't had this much of a presence in the housing market since September 2012. Unemployment is down among young adults, and many lenders are lowering their down payment requirements. These factors combined with more affordable mortgage insurance options are enticing many first-time buyers to leave their rentals and purchase homes. Economists with the National Association of Realtors (NAR) believe that the number of first-time buyers in the market will continue to rise. The percentage of these buyers will depend, however, on how fast mortgage rates and home prices climb.
Fewer Investors
While first-time buyers saw opportunity in the improving housing market, investors saw fewer deals. Individual investors purchased just 14 percent of all homes sold in May, a drop of 2 percent from a year ago. For the third month in a row, all-cash transactions accounted for 24 percent of all homes sold, down from 32 percent a year ago.
Demand Exceeding Supply
In May, housing inventory was up slightly because more homeowners put their houses on the market. Total housing inventory rose 3.2 percent to 2.29 million existing homes for sale. The housing supply is 1.8 percent greater than it was a year ago. At the current sales pace, this level of inventory represents a 5.1 month supply. Despite the modest increase in inventory, demand still far exceeds supply. On average, homes in May stayed on the market for 40 days. This is the third shortest time recorded since NAR began tracking this statistic in May 2011. The inventory shortage led to an increase in home prices. So not only was May the 39th month in a row to record year-over-year price gains, but every region in the country saw home prices increase.
Sales Climb Nationwide
In May, all regions of the country experienced sales increases. The Northeast posted the largest gains with existing-home sales jumping 11.3 percent, for a total increase of 11.3 percent from a year earlier. In the Midwest, sales climbed 4.1 percent month-over-month and an impressive 12.4 percent year-over-year. The South and West both saw an increase of 4.3 percent from April. When compared with May 2014, sales were 6.9 percent higher in the South and 9 percent higher in the West.
