Photographer: Scott McIntyre/Bloomberg

Top-Heavy U.S. Housing Market Is Crowding Out the Little Guys

The U.S. housing market is looking a little top-heavy these days.

Beneath a steady May existing home-sales number that helped put to rest fears that the busy selling season had perhaps hit a lull, the lingering supply issues haunting the industry could be making the market less stable as it continues to limit entry for lower-end buyers.

Purchases of the previously owned homes that make up more than 90 percent of the market held at a solid pace last month, in spite of inventories that are troublingly low, according to data from the National Association of Realtors. The supply of homes for sale inched up to 4.2 months from 4.1 months, while remaining below the five months that the group considers a tight market.

The supply that is being added to the market has been lopsided, with more affordable homes getting short shrift as builders play to the luxury market. This has coincided with more sales on the high end, while bargain buyers have fewer choices -- a potentially destabilizing trend.

With fewer options on the lower end, first-time buyers have been slow to enter the market even with mortgage rates that have held near record lows. The share of existing-home purchases made by debut buyers in May was 33 percent, little changed from 30 percent a year ago even as economists gauge whether the sweeping millennial cohort will put renting behind them.

The key to evening out market participants is wage growth. Average hourly earnings, while showing spotty signs of pickup, are still running at barely half the pace of home-price growth, which is accelerating faster. Detailed property-value figures for April will come Tuesday from S&P CoreLogic Case-Shiller.

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