Existing Home Sales Drop Unexpectedly

By:: Kara Johnson | June 22, 2010

Existing home sales fell 2.2 percent in May, surprising experts who had expected a continued increase from sales spurred by the homebuyer tax credits.

Sales of previously owned homes in May were at a seasonally adjusted annual rate of 5.66 million, down from a revised rate of 5.79 million in April, according to figures released this morning by the National Association of Realtors (NAR).

Industry observers had expected sales to increase to a rate of about 6.1 million, or an approximately 6 percent increase. Sales contracts for home purchases to qualify for the federal homebuyer tax credits had to be signed by April 30, so there was an expectation that May would see closings on many of those sales, boosting sales figures.

Although disappointing, the May figures still reflected a significant annual improvement, with a 19.2 percent increase over the 4.75 million rate recorded in May 2009. The figures include sales of previously owned single-family homes, townhouses, condominiums and co-ops.

The median sales price for homes of all types was $179,600, up from $172,300 in April. That may be due in part to a decline in the percentage of distressed homes as a share of all sales, which fell to 31 percent in May from 33 percent the previous month.

The median price represents a 2.7 percent annual gain over the May 2009 level, when the media price stood at $174,800.

Sales prices are influenced by the inventory of unsold homes on the market, which fell 3.4 percent in May, to 3.89 million in May. That reflects an 8.3 month supply at the current sales rate, but an increase of 1.1 percent in absolute numbers over May 2009.

The NAR expects that pending sales will decline notably in May and June, following the April 30 deadline for signing sales agreements to qualify for the homebuyer tax credits. The organization is hopeful that home sales will rebound in the second half of the year, but says that depends on job growth and a limited number of foreclosures entering the market.

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