Sales of previously owned homes in the United States rose at a slower-than-expected pace in May, an industry survey showed on Tuesday, pointing to a sluggish recovery from the severe economic recession.

KEY POINTS: * The National Association of Realtors said sales rose 2.4 percent to an annual rate of 4.77 million units from a downwardly revised 4.66 million pace in April. The May reading was below market forecasts for a 4.81 million-unit pace. However, sales increased for a second straight month. * The inventory of existing homes for sale fell 3.5 percent to 3.8 million. The median national home price fell 16.8 percent, the third largest drop on record, from the same period a year-ago to $173,000.

COMMENTS:

BOB WALTERS, CHIEF ECONOMIST, QUICKEN LOANS, LIVONIA, MICHIGAN:

For the second straight month, existing home sales have shown improvement, perhaps signaling that we are approaching the point where home prices are favorable enough to begin drawing in more buyers. The real test for this theory will come next month, when we will see what impact, if any, the recent increase in rates have had on home buyers. If the numbers remain strong, perhaps it is time to begin pondering if we have started to form a bottom in the housing market.

KEITH HEMBRE, CHIEF ECONOMIST, FIRST AMERICAN FUNDS, MINNEAPOLIS, MINNESOTA:

There's a pattern of stabilization that looks to be in place over the last six months in terms of sales. We'll probably see the pace of home price declines moderate pretty significantly, but what's absent is any real material improvement in the supply and demand balance.

GAIL DUDACK, CHIEF INVESTMENT STRATEGIST, DUDACK RESEARCH GROUP, NEW YORK:

I don't think that this data is all that important at this moment. I think the most important data going forward will be jobs. There's two things I am watching very carefully. One, how long does it take before we actually see job growth instead of job loss. And the second thing, in terms of housing, is related to the long end of the curve, interest rates. The pressure will be toward higher rates.

MICHELLE MEYER, ECONOMIST, BARCLAYS CAPITAL, NEW YORK:

The data was pretty much in line with our expectations, showing that existing home sales have seemingly bottomed. But, it is important to note that May existing home sales reflect housing conditions in April, which was prior to the run-up in mortgage rates. On the inventory side, there was good news, with the rise reversing the big increase in April.

Overall, it was a fairly positive report showing further increases in sales and declines in inventory. We are cautious in that this is lagged data, but we think home sales have bottomed and they have been moving sideways since the end of last year. It will be interesting to see data next month as it will reflect the impact of higher mortgage rates.

ANDREW BRENNER, SENIOR VICE PRESIDENT, MF GLOBAL, NEW YORK:

It was a little disappointing. I was looking for a bit of a better number, but it's around the expectation. The thing is that it's just too difficult to predict these kind of numbers, but we've seen housing improving.

As far as Treasuries and how it affects things, obviously it's stabilized and today the market is more concerned with the two-year auction and getting a bit of concession in as it comes to 1 o'clock. The economy is generally improving but maybe not according to the trajectory that the stock and commodity markets predicted over the last two weeks.

ANNA PIRETTI, SENIOR ECONOMIST, BNP PARIBAS, NEW YORK: 

It's positive in the sense that they have been increasing for the past two months, but it's a very small increase, less than the market was expecting.

Overall we should begin to see some stabilization in the sales number, although a lot of the resale volumes are still driven by foreclosures. It's positive in the sense that the market is getting rid of the inventories and it's clearing but at the same time it suggests that people are still defaulting on their mortgages and foreclosures are going up a quick pace.

So it's positive for some, negative for others. And prices are falling, so again that helps the market clear, but we're not there yet.

JACOB OUBINA, CURRENCY STRATEGIST, FOREX.COM, BEDMINSTER, NEW JERSEY:

Overall it's weaker than expected but does show we're trying to carve out a bottom here. The foreclosure portion of sales is slowing down at least. One month's supply for single family homes is back down to the low for the year, so that's also a welcome sign. I don't know that it's a green shoot. It seems to be more of a stabilization in the housing market.

GARY THAYER, SENIOR ECONOMIST, WELLS FARGO ADVISORS, ST. LOUIS, MISSOURI: It's good to see some modest gains, but it's a bit too early to say that we're seeing the start of a recovery. Home prices are still declining and inventory is still high. Those are headwinds that may restrain a recovery in housing.

SUBODH KUMAR, CHIEF INVESTMENT STRATEGIST, SUBODH KUMAR & ASSOCIATES IN TORONTO

In my view the housing number suggests that things are bottoming, but that's a far cry from improving. I think the markets are focused on how fast the recovery is going to be, and I think it won't be as fast as people are thinking. I think equities will remain in a corrective mode.

JOSEPH TREVISANI, CHIEF MARKET ANALYST, FX SOLUTIONS, SADDLE RIVER, NEW JERSEY:

Little better than expected with stability going back to the beginning of this year in the market. Very little effect on the currency markets.

MARKET REACTION: STOCKS: U.S. stock indexes gave back some gains. BONDS: U.S. Treasury debt prices were unchanged. DOLLAR: U.S. dollar weakened against the yen, slightly stronger against the euro.