May Existing-Home Sales Show Modest Gain

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RISMEDIA, June 30, 2008-Existing-home sales increased in May with buyers responding to lower home prices, according to the National Association of Realtors®. Existing-home sales-including single-family, townhomes, condominiums and co-ops – increased 2.0% to a seasonally adjusted annual rate of 4.99 million units in May from a level of 4.89 million in April, but are 15.9% below the 5.93 million-unit pace in May 2007.

NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said buyers are seeing value in the current housing market. “Home buyers are starting to get off the fence and into the market, drawn by drops in home prices in many areas and armed with greater access to affordable mortgages,” he said. “Today’s buyer plans to stay in a home for 10 years, which is a good strategy for building long-term wealth.”

The national median existing-home price for all housing types was $208,600 in May, down 6.3% from a year ago when the median was $222,700.

Lawrence Yun, NAR chief economist, said there’s still a lot of inventory in the market. “The large supply of homes on the market clearly favors buyers, and it should take several months to draw the inventory down,” he said. “Stabilization in home prices can only occur with buyers returning to the market, so we are encouraged by rising home sales, particularly in distressed markets. Foreclosures and short sales appear to be a larger part of the market, particularly in California, and are creating a drag on current home prices.”

Total housing inventory at the end of May fell 1.4% to 4.49 million existing homes available for sale, which represents a 10.8-month supply at the current sales pace, down from a 11.2-month supply in April.

Although conditions remain mixed around the country, unpublished snapshot data shows a number of areas are experiencing much higher sales activity than May 2007, including Sacramento, the San Fernando Valley and Monterey County in California; Sarasota, Fla.; and Battle Creek, Mich.

“Keep in mind that the volume of home sales is the primary driver of economic activity that is tied to housing,” Yun said. “It’d be premature to say the improvement marks a turnaround. The market is fragile, so a first-time home buyer tax credit and a permanent raise in loan limits would be important steps to get the housing engine humming.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 6.04% in May from 5.92% in April; the rate was 6.26% in May 2007.

Single-family home sales rose 1.6% to a seasonally adjusted annual rate of 4.41 million in May from 4.34 million in April, but are 14.5% below the 5.16 million-unit pace in May 2007. The median existing single-family home price was $206,700 in May, which is 6.8% below a year ago.

Existing condominium and co-op sales increased 5.5% to a seasonally adjusted annual rate of 580,000 units in May from 550,000 in April, but are 24.6% lower than the 769,000-unit level a year ago. The median existing condo price4 was $223,400 in May, down 2.1% from May 2007.

Regionally, existing-home sales in the Midwest rose 5.5% in May to a pace of 1.16 million but are 16.5% lower than a year ago. The median price in the Midwest was $165,300, which is 0.7% below May 2007.

In the Northeast, existing-home sales rose 4.6% to an annual rate of 910,000 in May, but are 15.0% below May 2007. The median price in the Northeast was $278,000, down 2.4% from a year ago.

Existing-home sales in the West increased 2.0% to an annual pace of 1.02 million in May, but are 12.8% below a year ago. The median price in the West was $286,600, which is 16.0% lower than May 2007.

In the South, existing-home sales slipped 0.5% to an annual rate of 1.91 million in May, and are 17.0% below May 2007. The median price in the South was $175,000, down 4.3% from May 2007.

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