RTTNews - Existing home sales increased for the second consecutive month in May, according to a report released by the National Association of Realtors on Tuesday, although the sales growth came in below economist estimates.
The report showed that existing home sales rose 2.4 percent to an annual rate of 4.77 million units in May from a revised 4.66 million units in April. Economists had expected sales to rise 3 percent to 4.82 million units from the 4.68 million units originally reported for the previous month.
Despite the downward revision to April sales, the annual rate of existing home sales for the month was still up 2.4 percent compared to March. Subsequently, existing home sales showed their first back-to-back monthly gains since September 2005.
However, NAR noted that existing home sales remain 3.6 percent below the 4.95 million-unit rate reported for May of 2008.
Lawrence Yun, NAR chief economist, said, Historically low mortgage interest rates clearly drew buyers into the market, and housing remains very affordable even with a recent uptick in rates.
First-time buyers also are being drawn off the sidelines by the $8,000 tax credit, which is helping to absorb inventory, Yun added.
Strong sales growth in the Midwest contributed to the monthly increase in sales, with existing home sales in the Midwest jumping 9.0 percent. Existing home sales in the Northeast also showed a notable 3.9 percent increase.
At the same time, the report showed that existing home sales in the South were unchanged, while existing home sales in the West edged down 0.9 percent.
Yun said that the increase in existing home sales came in below expectations because poor appraisals are stalling transactions.
Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting a loan, he said.
The report also showed that total housing inventories at the end of May fell 3.5 percent to 3.80 million existing homes available for sale. This represents 9.6 months of supply at the current sales pace, down from 10.1 months of supply in April.
NAR added that the national median existing home price for all housing types was $173,000 in May, down 16.8 percent from a year earlier. Distressed properties continue to downwardly distort the median price, the group said.
The Commerce Department is scheduled to release a separate report on new home sales in the month of May on Wednesday, with the report expected to show that new home sales rose 2.3 percent to an annual rate of 360,000 units.
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