Existing home sales rose 2% in May but prices continued to fall

The Economy, Real Estate June 26th, 2008

The National Association of Realtors just reported the existing home sales numbers for May.

According to CNBC:

Existing-Home Sales Rise 2% in May, Above Forecasts

Sales of existing homes in the United States rose 2% in May from the previous month to a 4.99 million-unit annual rate, the National Association of Realtors said, slightly beating analysts expectations.

The inventory of homes for sale shrank by 1.4 pct to 4.49 million homes or a 10.8 months’ supply at the current sales pace.

Meanwhile, the median national home price declined 6.3 percent from a year ago to $208,600.

This is how Bloomberg reported the news:

A drop in property values may have spurred demand in some of the most distressed areas, such as California and the Midwest. Even so, rising mortgage rates, a glut of unsold homes, and stricter borrowing rules indicate the real estate recession will persist for most of the year.

“Although it looks like it’s improving, the housing market still has a long period of adjustment,” said Zach Pandl, an economist at Lehman Brothers Holdings Inc. in New York, who forecast sales would rise to a 5 million pace. “There is still a huge imbalance” between sales and inventories.

April’s matched a record low for existing home sales.

Compared with a year earlier, sales were down 16 percent in May.

Other reports today showed that firings remained elevated last week and the economy grew in the first quarter at a faster pace than previously estimated.

Jobless Claims

Initial jobless claims were unchanged at 384,000, according to the Bloomberg survey median. The total number of people collecting benefits rose by 82,000 to 3.139 million in the week ended June 14, the highest since February 2004.

USA Today had this to say:

The National Association of Realtors said Thursday that sales of existing single-family homes and condominiums rose 2% to a 4.99 million annual rate last month.

It was only the second sales increase in the past 10 months, but it was not viewed as a sustained rebound. Many economists believe prices will have to fall further before the housing industry can mount a sustained recovery.

The median price of an existing home sold in May dropped to $208,600, down 6.3% from a year go. That was the fifth biggest year-over-year price decline in records that go back to 1999. At the median, half of homes sold for more, half sold for less.

The inventory of unsold homes dropped 1.4% to 4.49 million units, which represents a 10.8-month supply at the May sales pace, down from an 11.2-month supply in April. That’s still about double the inventory level that existed during the five-year housing boom.

“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,” said Lawrence Yun, the Realtors’ chief economist.

However, rising mortgage foreclosures are dumping even more homes onto the already glutted housing market.

These are some interesting parts in the NAR report:

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,”

Here notice how the guy from the NAR is trying to make sure that Congress still approves the bailout plan. In other words, provide the drug addict (the American consumer) with his fix (more easy money) so they can keep buying homes and making the NAR and its members rich.

“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.”

Take a look at the huge price drop in the West: 16% Ouch!!!

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