By Mark Huffman
ConsumerAffairs.com
June 23, 2010
Sales of existing homes fell 2.2 percent from April to May, taking many industry analysts by surprise. Sales closings were expected to remain strong through the end of this month, the closing deadline for the federal homebuyers' tax credit.
In its monthly report, the National Association of Realtors (NAR) says sales were at an annual rate of 5.66 million units, compared with 5.79 million in April. While the tax credit expired April 30, buyers have until June 30 to close on their purchases to qualify for the tax break.
The Realtors group predicts mortgage processing delays means many buyers who expect to receive the tax credit, won't.
"Approximately 180,000 home buyers who signed a contract in good faith to receive the tax credit may not be able to finalize by the end of June due to delays in the mortgage process, particularly for short sales," said Lawrence Yun, NAR's chief economist. "In addition, many potential sales are being delayed by an interruption in the National Flood Insurance Program. Florida and Louisiana, also impacted by the oil spill, have the highest percentage of homes that require flood insurance."
NAR said it would continue to push for Congressional action to extend the homebuyer tax credit closing deadline through September 30 for contracts written by April 30, and to renew the flood insurance program.
"Sales and related local economic activity would have been higher without delays in the closing process or flood insurance issues," Yun said. The tax credit was intended to stimulate the housing market and -- to some degree -- it has. But industry analysts have expressed doubts the recent sales activity can be sustained once the tax credit expires.
Pending home sales are expected to decline notably in May and June from the spring surge, but Yun added that job growth and a manageable level of foreclosures are keys to sales and price performance during the second half of the year.
First time buyers still active
A parallel NAR practitioner survey shows first-time buyers purchased 46 percent of homes in May, versus 49 percent in April. Investors accounted for 14 percent of transactions in May compared with 15 percent in April; the remaining sales were to repeat buyers. All-cash sales were at 25 percent in May, edging down from a 26 percent share in April.
Total housing inventory at the end of May fell 3.4 percent -- to 3.89 million existing homes available for sale, which represents an 8.3-month supply at the current sales pace, compared with an 8.4-month supply in April. Raw unsold inventory is 1.1 percent above a year ago, but is still 14.9 percent below the record of 4.58 million in July 2008.
Single-family home sales declined 1.6 percent to a seasonally adjusted annual rate of 4.98 million in May from a pace of 5.06 million in April, but are 17.5 percent above the 4.24 million level in May 2009. The median existing single-family home price was $179,400 in May, which is 2.7 percent above a year ago.
Single-family median existing-home prices were higher in 16 out of 20 metropolitan statistical areas reported in May from a year ago. In addition, existing single-family home sales rose in 18 of the 20 areas from May 2009.
Existing condominium and co-op sales fell 6.8 percent to a seasonally adjusted annual rate of 680,000 in May from 730,000 in April, but are 32.6 percent above the 513,000-unit pace in May 2009. The median existing condo price5 was $181,300 in May, up 3.4 percent from a year ago.
Northeast leads decline
Regionally, existing-home sales in the Northeast fell 18.3 percent to an annual level of 890,000 in May from a surge in April, but are 12.7 percent higher than a year ago. The median price in the Northeast was $240,200, down 2.2 percent from May 2009.
Existing-home sales in the Midwest were unchanged in May at a pace of 1.33 million and are 22 percent above May 2009. The median price in the Midwest was $150,700, up 2.2 percent from a year ago.
In the South, existing-home sales increased 0.5 percent to an annual level of 2.15 million in May and are 22.9 percent above a year ago. The median price in the South was $159,000, up 1 percent from May 2009.
Existing-home sales in the West rose 4.9 percent to an annual rate of 1.29 million in May and are 15.2 percent higher than May 2009. The median price in the West was $221,300, up 7.4 percent from a year ago.
