Existing Home Sales A Six-Month Low

There was more evidence today that housing is in a double-dip recession, as the National Association of Realtors (NAR) reported sales of existing homes dropped 3.8 percent from April to May. The annual rate of 4.81 million units is the lowest in six months.

At the same time, the report shows the average home continues to lose value. Prices dropped 4.6 percent from May 2010.

“Spiking gasoline prices along with widespread severe weather hurt house shopping in April, leading to soft figures for actual closings in May,” said Lawrence Yun, NAR's chief economist. “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.”

Investors and buyers with all cash continue to hold sway in this market. The report shows all-cash transaction accounted for 30 percent of May's home purchases, down only slightly from April. Investors make up the bulk of cash buyers.

Banks hurting, not helping

Yun said the market continues to be held back by lenders.

“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,” he said.

There were notable regional differences in home sales. “A large decline in Midwestern existing-home sales can be attributed partly to the flooding and other severe weather patterns that occurred, but this also implies a temporary nature of soft market activity,” Yun explained.

Single-family home sales declined 3.2 percent to a seasonally adjusted annual rate of 4.24 million in May from 4.38 million in April, and are 15.4 percent below a surge to 5.01 million one year ago. The median existing single-family home price was $166,700 in May, down 4.5 percent from May 2010.

Existing condominium and co-op sales fell 8.1 percent to a seasonally adjusted annual rate of 570,000 in May from 620,000 in April, and are 14.7 percent below the 668,000-unit pace in May 2010. The median existing condo price5 was $165,400 in May, which is 5.8 percent below a year ago.

Regional breakdown

Regionally, existing-home sales in the Northeast declined 2.5 percent to an annual level of 770,000 in May and are 13.5 percent below May 2010. The median price in the Northeast was $241,500, up 6.1 percent from a year ago.

Existing-home sales in the Midwest dropped 6.4 percent in May to a pace of 1.02 million and are 22.7 percent below a year ago. The median price in the Midwest was $136,400, which is 8.5 percent below May 2010.

In the South, existing-home sales fell 5.1 percent to an annual level of 1.85 million in May and are 14.4 percent below May 2010. The median price in the South was $149,200, down 3.1 percent from a year ago.

Existing-home sales in the West were unchanged at an annual pace of 1.17 million in May but are 10.0 percent lower than a year ago. The median price in the West was $192,300, which is 12.6 percent below May 2010.