Existing home sales improved last month but the supply of homes for sale remains tight — which isn't good news for buyers. Total existing home sales increased 4.2% to a seasonally adjusted annual rate of 5.18 million up from 4.97 million. That's the highest rate since November 2009 and almost 13% above year-ago levels.

Economists indicate that the recovery is strengthening and that housing numbers are overwhelmingly positive. However, the number of available homes is unlikely to grow, despite a moderate gain last month, unless new home construction ramps up quickly by an additional 50%. Only additional supply from new homebuilding can moderate future price growth.

Existing-home sales are at the highest level since November 2009 when the market jumped to 5.44 million as buyers took advantage of tax stimulus. Sales have stayed above year-ago levels for 23-months, while the national median price shows 15 consecutive months of year-over-year increases.

Total housing inventory at the end of last month rose 3.3% to 2.22 million existing homes available for sale, which represents a 5.1-month supply at the current sales pace, down from 5.2 months in April. Listed inventory is 10.1% below a year ago, when there was a 6.5-month supply.

The national median existing-home price for all housing types was $208,000 up 15.4% from May 2012. This marks six straight months of double-digit increases and is the strongest price gain since October 2005, which jumped a record 16.6% from a year earlier. The last time there were 15 consecutive months of year-over-year price increases was from March 2005 to May 2006.

Distressed home – foreclosures and short sales – accounted for 18% of sales, unchanged from the previous month. Eleven percent of sales were foreclosures, and 7% were short sales. Foreclosures sold for an average discount of 15% below market value, while short sales were discounted 12%.

The boom period was marked by easy credit and overbuilding, but today we have tight mortgage credit and widespread shortages of homes for sale. The issue now is pent-up demand and strong growth in the number of households. These conditions are contributing to significant price growth.

The median time on market for all homes was 41-days, down from 46-days the month before. Short sales were on the market for a median of 79-days, while foreclosures typically sold in 43-days and non-distressed homes took 39 days. Forty-five percent of all homes sold were on the market for less than a month. The median time on the market is the shortest since monthly tracking began in May 2011.

First-time buyers accounted for 28% of purchases, compared with 29% in the month before and 34% year over year. All-cash sales were at 33% of transactions in last month, up from 32% the month before. Individual investors, who account for many cash sales, purchased 18% of.

Single-family home sales rose 5.0% to a seasonally adjusted annual rate of 4.60 million up from 4.38 million over the previous month, and are 12.7% higher than the 4.08 million-unit pace in May 2012. The median existing single-family home price was $208,700 in May, up 15.8% above a year ago, the strongest increase since October 2005 when it jumped 16.9% from a year earlier.

Regionally, existing-home sales in the Northeast rose 1.6% to an annual rate of 650,000 and are 8.3% above 2012. The median price in the Northeast was $269,600, up 12.3% from a year ago. Existing-home sales in the Midwest jumped 8.0% to a pace of 1.21 million, and are 16.3% higher than a year ago. The median price in the Midwest was $159,800, up 8.2% from 2012.

In the South, existing-home sales rose 4.0% to an annual level of 2.09 million and are 16.1% above 2012. The median price in the South was $183,300, which is 15.0% above a year ago. Existing-home sales in the West increased 2.5% to a pace of 1.23 million and are 7.0% above a year ago. With the tightest regional supply, the median price in the West was $276,400, up 19.9% from 2012.