US home sales are soaring, as the recovering economy fuels the housing market. Prices, though, are rising too.
Pending sales rose 0.9 per cent in in May 2015, taking the National Association of Realtors' index to its highest level in nine years. Pending sales are 10.4 per cent higher than one year ago and have now risen year-on-year for nine months in a row.
Sales declined slightly in the Midwest and South, but these were cancelled out by rises in the Northeast and the West. In the Northeast, the NAR's sales index increased 6.3 per cent, while the Midwest saw the index decline 0.6 per cent. Pending home sales in the South decreased 0.8 per cent and, in the West, rose 2.2 per cent.
On an annual basis, though, all four regions showed "solid gains".
This could be the best start to a year since the recession, says Lawrence Yun, NAR chief economist.
"The steady pace of solid job creation seen now for over a year has given the housing market a boost this spring," he comments. "It's very encouraging to now see a broad based recovery... and new home sales also coming alive."
Indeed, the market has recovered to the point where normal buyers are once again able to get their feet on the housing ladder: the NAR's existing home sales report found that the share of activity made up by first time buyers climbed from 30 per cent in April to 32 per cent in May, their highest share since September 2012.
Inventory is not rising to meet growing demand from buyers, though: sales may be stronger than a year ago, but supply levels are still the same. Yun warns that this could cause home prices to rise at an "unhealthy and unsustainable pace".
Combined with potential rate increases on the horizon, these rising prices could soon provide more obstacles to first time buyers hoping to purchase a property.
"Housing affordability remains a pressing issue with home-price growth increasing around four times the pace of wages," adds Yun.
"Without meaningful gains in new and existing supply, there's no question the goalpost will move further away for many renters wanting to become homeowners."