By Chris Isidore NEW YORK (CNNMoney) Home sales and prices continued to climb in May, according to an industry trade group report which raised the prospect of a new housing bubble unless there is a significant increase in home building.
"The home price growth is too fast, and only additional supply from new homebuilding can moderate future price growth," said Lawrence Yun, the chief economist for the National Association of Realtors. He said there needs to be a 50% increase in home building.
May sales data from the group shows the median home price jumped 8% from the previous month to $208,000. While month-to-month price swings are not unusual, the year-over-year rise is now 15%, and prices are at levels last seen in the summer of 2008, just before the meltdown in financial markets caused by the bursting of the housing bubble.
The Realtors report had the strongest year-over-year price increase since October 2005, near the height of the housing bubble. And it marked the 15th straight month of annual price increases, the first time that happened since May 2006.
Other readings on home prices, including one from S&P/Case-Shiller, have also shown big jumps in prices recently, with Case-Shiller showing the biggest gain in seven years.
Home prices have been driven higher partly by a drop in foreclosures. Only 18% of home sales in the month were so-called distressed sales, which typically sell at a discount to market prices. Those sales include homes in foreclosure and so-called short sales where sellers get less than they owe on the mortgage. That matches the lowest percentage of distressed sales since the Realtors started tracking that measure in 2008 in the wake of bursting of the housing bubble. A year ago 25% of sales were distressed sales.
Overall sales rose 4% from April and 13% from a year earlier to an annual rate of 5.18 million homes in the month, the highest sales pace since November 2009.
There are differences between this run-up in prices and the housing bubble that preceded the financial crisis, said Gary Thomas, the Realtors' president.
"The boom period was marked by easy credit and overbuilding, but today we have tight mortgage credit and widespread shortages of homes for sale," he said. The improved housing market and mortgage rates still near record lows, despite a recent rise in rates, is pulling buyers back in the market faster than it's prompting sellers to put homes on the market. Buyer traffic 29 percent above a year ago, but the supply of homes for sale is actually down 10%.
That's caused homes to sell much more quickly -- only 41 days on the market on average in May, about a month faster than a year ago, with nearly half the homes being sold in less than a month.
The warnings about prices rising too fast was a stark change from the Realtors position during the heyday of the housing bubble, when the statement from officials generally cheered the steady rise in prices.