Existing Home Sales Fall 3.8% in May To Lowest Rate in Six Months
Linda Young

June 23, 2011

Washington, D.C.

Sales of existing homes in May fell by 3.8 percent from a month earlier to a seasonally adjusted annual rate of 4.81 million, according to a report by the National Association of Realtors.

That put existing home sales at its slowest rate in the last six months, since November.

Moreover, sales were down by more than 15 percent when compared to May 2010.

With a 9.3-month supply of housing units on the market, prices continue to drop and the continued high unemployment rate is being blamed for the shortage of buyers.

However, NAR's chief economist, Lawrence Yun, also blamed temporary factors.

"Spiking gasoline prices along with widespread severe weather hurt house shopping in April, leading to soft figures for actual closings in May," he said. "Current housing market activity indicates a very slow pace of broader economic activity, but recent reversals in oil prices are likely to mitigate the impact going forward. The pace of sales activity in the second half of the year is expected to be stronger than the first half, and will be much stronger than the second half of last year."

He also blamed financing problems for the slow-down in existing housing sales.

"Even with recent economic softness, this is a disappointing performance with home sales being held back by overly restrictive loan underwriting standards," Yun said. "There's been a pendulum swing from very loose standards which led to the housing boom to unnecessarily restrictive practices as an overreaction to the housing correction - this overreaction is clearly holding back the recovery."

Although housing prices continue to drop in some areas, especially those with high numbers of foreclosures in the pipeline, in areas with good employment conditions housing prices are stable or increasing. Areas with those conditions included Alaska, North Dakota, Washington, D.C. and some areas in Texas.

Overall, the national median price for all existing housing types was $166,500 in May, down 4.6 percent from May 2010, while distressed homes were typically selling at discounts of around 20 percent. Existing housing sales for distressed properties represented about 31 percent of sales in May, a decrease of 37 percent in April, NAR said.

The data for existing home sales counts single-family, townhomes, condominiums and co-ops.