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Coldwell Banker CEO: This is the challenge for housing

Housing is a "great story" but would be even greater if the inventory was there for buyers, Budge Huskey, CEO of Coldwell Banker Real Estate, said Friday.

Sales of existing U.S. homes rose more than expected in April, increasing 1.7 percent to an annual rate of 5.45 million units, according to the National Association of Realtors.

However, there is still a housing shortage.

While homeowners know it's a great time to sell, many are questioning where they are going to move to next, Huskey said in an interview with CNBC's "Power Lunch."

"We haven't see the level of new construction activity. It's starting to come back, finally shifting from the rental market to single family, but we've got a long way to go to reach the levels that were historically seen in terms of new construction," he said.

The good news is that there has been an increased number of new listings that have come on the market, he said.

"The challenge is that demand is so strong, total inventory levels are actually declining in many cases."

Huskey is also encouraged by the uptick in first-time homebuyers. The share of those buyers rose to 32 percent in April from 30 percent a year ago.

"While still not to historic levels of 40 percent, the uptick to 32 percent indicates that people are returning to the market," he said.

Plus, household formation has come on strong within the past 12 months, Huskey added.

"A lot of those individuals are moving into rentals but we know if we can get them there, it is a two-stage recovery, they'll eventually move into a home of their own."

Meanwhile, he's also unconcerned about a rise in interest rates. The minutes from the Federal Reserve's April meeting show the central bank will likely raise rates in June if economic data points to stronger second-quarter growth as well as firming inflation and employment.

"Any increase in interest rates will be nominal, as we know, and it's not going to be enough to serve as an impediment to the continued recovery," Huskey said.

— Reuters contributed to this report.