Redfin: Home prices have seen their largest annual gain in 7 months

Home prices were up 3.6% year-over-year in May according to Redfin, the largest annual gain in 7 months.

The firm says that only 6 of the 85 metros it surveyed showed a decline in their median prices year-over-year: San Jose (6%), New York (2.5%), Honolulu (2.2%), Orange County (-1.4%), Los Angeles (-0.8%) and Oakland (-0.7%).

Sales meanwhile were flat with only a 0.2% gain year-over-year despite gains in 48 of the metros surveyed. And inventory was up 2.5%, the smallest annual gain in 8 months, while new listings slipped 0.7% year-over-year.

Redfin chief economist Daryl Fairweather said there was an increase in homebuyer interest as mortgage rates slipped.

"Recent surges in mortgage applications also reflect the impact low rates are having on homebuyer demand nationwide. We haven't yet seen a commensurate increase in U.S. home sales, and I don't expect sales to increase substantially in the long run,” Fairweather said.” That's because there still aren't enough homes for sale for all of the people who want to buy homes. Low rates and rising prices will likely lure sellers onto the market this summer, but the lack of new construction will continue to hold back sales growth."

The median number of days on market dropped to 36 days in May from 37 days a year earlier, the lowest number since Redfin began tracking the metric in 2000.