Existing US Home Sales Slip 1.5 Percent

The National Association of realtors reported Thursday that existing home sales fell by 1.5 percent in May, as prices surged nearly 8 percent to their highest levels since June 2010. The report indicated that homes sold at a seasonally adjusted annual pace of 4.55 million units, just below the consensus estimate of 4.57 million projected by economists in a recent Bloomberg survey. While still well below the pace of 6 million units sold which economists view as indicative of a healthy market, the pace of existing home sales has recovered substantially since setting a post-recession low of 3.39 million units in July 2010. The highest sales pace ever for existing homes was 7.25 million, reached in September 2005, before the nation’s worst downturn since the 1930s.

The total inventory of previously lived in homes on the market fell 0.4 percent from April to May to 2.49 million. AT last month’s rate of sales, that inventory would take 6.6 months to sell out, up from the 6.5 months it would take to sell April’s inventory at that pace. A bright spot in the NAR’s report on Thursday was that sales picked up in the Midwest, but that was about it as sales slipped in the other three regions, led by a decline of 4.8 percent in the Northeast. Cash transactions continued to account for a large portion of sales last month, at 28 percent, as foreign investors continued to snap up cheaply prices homes in the US. The percentage of first-time buyers, meanwhile, was 34 percent, well below the range of 40 to 45 percent associated with a healthy housing sector. While record-low interest rates and steeply discounted properties have created some of the most affordable homebuying conditions in history, the continuous flood of foreclosures is weighing on the market by driving prices down and increasing inventory.

Foreclosures had slowed considerably over the last 16 months while lenders negotiated settlements over allegations of improper foreclosure practices, but foreclosure starts picked up for the first time in that span last month, suggesting the foreclosure pipeline is about to be reopened.