By Ryan Jackson
Home sales fell in May to provide a slow start to the summer home selling season, which is usually the busiest time of the year for the housing market after producing an increase in closed transactions the prior month. Sales saw a fall of just 1.5% for the month, however, to a seasonally adjusted annual rate of 4.55 million homes, according to the National Association of Realtors.
The association blamed the lack of discount priced homes for the decline in sales, which include foreclosures and bank short sales, in which homeowners are allowed to sell their homes at less than what they owe on a mortgage. Nationally only 25% of all home sales were distress sales or foreclosures and short sales, down from almost 40% a year ago. Sales, however, remain above last years pace.
“The normal seasonal upturn in inventory did not occur this spring,” said NAR economist Lawrence Yun. “Even with the monthly decline, home sales have moved markedly higher with 11 consecutive months of gains over the same month a year earlier.”
A broad based shortage of inventory in lower price ranges restrained sales as lenders held back a massive supply of inventory of homes that have been foreclosed, and at least 1.4 million others in the shadow inventory, which have not yet formally been repossessed from mortgage holders.
The supply of homes is extremely tight in Western states, including California and Washington, where real estate agents are calling for an expedited process to clear the foreclosure inventory. At the end of 2011, foreclosures totaling 180,000 homes were being held by the nation’s giant mortgage lenders, Freddie Mac and Fannie Mae. The inventory has increased in the intervening months.
Housing inventory slipped 0.4% at the end of May to 2.49 million existing homes available for sale, representing a 6.6-month supply of homes listed by association members. The figure is 20.4% below a year ago when a 9.1 month supply was listed for sale. The inventory peaked in July 2007 at 4.04 million homes across the U.S.
Still, home buyers are facing restrictive mortgage lending requirements. A FICO score of 740 is needed to qualify for a conventional fixed rate loan at the lowest mortgage rates. But other mortgages, including FHA loans allow for lower credit scores to obtain mortgage financing.