The National Association of Realtors reported today that home sales jumped by 4.9 percent over the previous month. That works to an annualized number of homes sold by fewer than 5 million for 2014. This increase was the largest month to month gain since August of 2011. At the same time,home sales and inventory up for may inventory seems to be catching up as well. Many economists had expected somewhere closer to a 2.2 percent month to month jump, much lower than ultimately reported.

Did the drop in interest rates spur the markets? That’s hard to tell but it’s highly unlikely. Interest rates have gradually drifted lower to rates seen a year ago but the drop hasn’t been significant enough to spur someone sitting on the fence. 30 year mortgage rates have been in a range as small as 10 basis points so far this year, hardly something that can encourage home buying. Still, rates are very attractive and well below 4.50 percent.  Comparing the number of homes sold in May 2013 to May 2014, there were fewer homes sold in May 2014, down 5.00 percent from the same period last year.

The number of homes on the market showed an increase as newer homes has appeared to have caught the wave and are ready for purchase.  The current supply of existing homes for sale increased to 5.7 months and the inventory of unsold homes jumped 6.00 percent compared to May 2013.

The Fed has been telling the markets that perhaps the single most important sector for the recovery is the housing market and the news released today indicates just that. Not anything that will blow the doors of any estimate but a steady increase nonetheless. We’re soon into the final stretch of the home buying season as summer begins and winds down. Rates should remain in their current range through that period as well.