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EXISTING HOME SALES RISE IN MAY
Online Newsletter July 2009
BuildingOnline's eUpdate - June 25, 2009
Sales of existing homes showed another gain in May, benefiting from
favorable affordability conditions and a first-time buyer tax
credit, according to the National Association of Realtors. May's
increase was the first back-to-back monthly gain since September
Existing-home sales x96 including single-family, townhomes,
condominiums and co-ops x96 rose 2.4 percent to a seasonally
adjusted annual rate1 of 4.77 million units in May from a downwardly
revised level of 4.66 million units in April, but remained 3.6
percent below the 4.95 million-unit pace in May 2008.
Lawrence Yun, NAR chief economist, expected an improvement.
"Historically low mortgage interest rates clearly drew buyers into
the market, and housing remains very affordable even with a recent
uptick in rates," he said. "First-time buyers also are being drawn
off the sidelines by the $8,000 tax credit, which is helping to
absorb inventory. However, the increase in sales is less than
expected 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
Total housing inventory at the end of May fell 3.5 percent to 3.80
million existing homes available for sale, which represents a
9.6-month supply at the current sales pace, down from a 10.1-month
supply in April.
Yun said the appraisal problem is serious. "Lenders are using
appraisers who may not be familiar with a neighborhood, or who
compare traditional homes with distressed and discounted sales," he
said. "In the past month, stories of appraisal problems have been
snowballing from across the country with many contracts falling
through at the last moment. There is danger of a delayed housing
market recovery and a further rise in foreclosures if the appraisal
problems are not quickly corrected."
An NAR practitioner survey in May showed first-time buyers accounted
for 29 percent of transactions, and that the number of buyers
looking at homes is nearly 10 percentage points higher than a year
ago. "This is the time of year when we see large increases in the
number of repeat buyers, who are benefitting from sales to
entry-level buyers," Yun said. "Investors appear less active, but
are more prevalent in areas with large price corrections."
NAR President Charles McMillan, a broker with Coldwell Banker
Residential Brokerage in Dallas-Fort Worth, said appraisals and the
tax credit are key issues. "To maximize the potential for a housing
recovery and subsequent economic recovery, we need realistic
appraisals that are based on proper comparisons and done by a local
specialist," he said. "In addition, the first-time buyer tax credit
should be expanded to all buyers of primary homes regardless of
income. Extending the credit into 2010 would allow more time for the
market to catch up with underlying demand, in part because many
families with children, who normally time their purchase based on
school year considerations, do not have enough time to move before
the start of school in late August.
"Freeing a pent-up demand in housing will absorb inventory at a
faster pace, strengthen communities and stabilize home prices
earlier," McMillan said.
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, which declined to 33 percent of all sales in May from 45
percent in April, continue to downwardly distort the median price
because they generally sell at a discount relative to traditional
"The decline in the distressed sales share likely results from an
increase of repeat buyers in May," Yun said. "First-time buyers are
concentrated in the lower price ranges, which include most of the
Single-family home sales rose 1.9 percent to a seasonally adjusted
annual rate of 4.25 million in May from a pace of 4.17 million in
April, but are 3.0 percent below the 4.38 million-unit level in May
2008. The median existing single-family home price was $172,900 in
May, down 16.1 percent from a year ago.
Existing condominium and co-op sales increased 6.1 percent to a
seasonally adjusted annual rate of 520,000 units in May from 490,000
in April, but are 8.9 percent below the 571,000-unit level in May
2008. The median existing condo price4 was $173,800 in May, down
21.9 percent from a year earlier.
Regionally, existing-home sales in the Northeast rose 3.9 percent to
an annual level of 800,000 in May, but are 10.1 percent below a year
ago. The median price in the Northeast was $243,600, which is 12.5
percent below May 2008.
Existing-home sales in the Midwest jumped 9.0 percent in May to a
pace of 1.09 million but are 4.4 percent below May 2008. The median
price in the Midwest was $145,800, which is 10.4 percent lower than
a year ago. In the South, existing-home sales were unchanged at an
annual pace of 1.74 million in May but are 8.9 percent below a year
ago. The median price in the South was $157,400, down 9.9 percent
from May 2008.
Existing-home sales in the West slipped 0.9 percent to an annual
rate of 1.14 million in May, but are 11.8 percent higher than May
2008. The median price in the West was $197,700, down 30.6 percent
from a year ago.