The total supply of homes for sale in May was 5.4 percent lower than a year earlier. Redfin recorded a 2½-month supply of remaining homes for sale at the end of the month. A six-month supply is considered a balanced market between buyers and sellers.

Homes are selling so quickly because there are so few for sale. More new listings did come on the market in May, 4.3 percent more than in May 2017. While that helped to increase the number of sales, it did not help the overall supply situation much because demand is so strong.

If a "for sale" sign goes up in your neighborhood, don't blink, you might miss it. The average home sold in May went under contract in just 34 days, according to real estate brokerage Redfin.

The shortage of listings continues to drive prices higher and incite bidding wars. Of the homes that sold in May, 27.6 percent went above their list price — another record in the markets Redfin tracks.

Interestingly, nearly a quarter of sellers in May dropped their prices, the highest percentage since September.

"Prices are still increasing, but not at the same rate we saw earlier in the spring," said Redfin senior economist Taylor Marr. "While it's still very much a seller's market, price growth and rising mortgage rates may be pushing buyers to the limit of what they're able to pay."

Mortgage rates have been rising since the start of this year and are now hovering around their highest level in seven years. The expectation is that rates will continue to rise modestly through the second half of this year.

"Fortunately, the economy is strong and wages are rising," said Lawrence Yun, chief economist for the National Association of Realtors. "If housing supply can be increased through new home building, then the negative impact of rising interest rates can be mitigated."

The nation's homebuilders have been increasing production, but slowly, and mostly in the move-up price market. Demand is strongest at the entry level, and supply here is leanest. That will continue to keep most markets competitive throughout this year.

Regionally, Denver is the nation's fastest sales market, according to Redfin. The average home there is going under contract in just six days. Seattle and Tacoma, Washington, were the next fastest markets at seven days, followed by Boston and Grand Rapids, Michigan, at eight days on the market.