Rapid Reaction: May Existing Home Sales

• May existing home sales rose 1.1 percent from April and 2.7 percent from a year ago, to 5.62 million sales (SAAR), according to the National Association of Realtors (NAR).
• Inventory of existing homes for sale rose slightly in May from April, but was down 8.4 percent from a year ago, and has fallen on an annual basis in each month for the past two years.
• The typical home sold in May stayed on the market for 27 days, a record low according to NAR. More than half (55 percent) of homes sold were on the market for less than one month.

The fact that sales of existing homes rose in May -- despite incredibly limited selection, shrinking times on market and rapidly rising prices -- is a testament to just how strong the draw to homeownership is right now for millions of Americans. It's no exaggeration to say that current buying conditions in many markets are terrible, with sellers in complete control and buyers forced to contend with cutthroat competition and intense pressure to make a deal. There's a number of reasons inventory is so low, including relatively limited new construction (especially at lower price points), pockets of high negative equity that prevent sellers from listing and a shift in the housing stock toward single-family home rentals that keeps those homes from trading hands as frequently as they might. But while inventory is incredibly tight, the main hurdle to buying may be rising prices themselves and the difficulty in putting together a suitable down payment. Still, despite these notable challenges, buyers are finding ways to make things work and continue to come out in droves. As long as the economy keeps chugging along as it has, I see no reason for this widespread demand to fall off  -- nor for the pendulum to meaningfully swing back in favor of buyers -- any time soon.