By Kevin Chiu
Existing home sales fell a slight 2.2% in May, but sales remain at a higher level than a year ago alleviating some fears about the housing market, according to the National Association of Realtors. The monthly report also showed a fall in the number of homes listed for sale, signaling an improving trend for markets as inventory gets bought up by home buyers.
The drop in sales, however, caught many analysts off guard as they predicted higher home sales with the end of the federal government’s tax credit for home buyers. Seasonally adjusted annual sales accounted for 5.66 million single family homes, condominiums and townhouses that were sold during the month. Closings were 19.2% above year ago levels, demonstrating a slow but consistent recovery in markets, mainly due to government stimulus actions.
The inventory of homes listed for sale is integral to the markets recovery. Some 3.89 million existing homes are listed by real estate agents nationwide, representing a 14.9% drop from July 2008 inventory when the number of homes listed was at its peak. The inventory represents about an 8.3 month supply of homes at present sale rates. A balance is achieved in markets when there is about a six month supply.
The NAR report only shows the number of homes listed by Realtors, and does not account for the pent up inventory of homes in the foreclosure process, estimated at more than 4-million units, homes listed by auction companies and bankers.
The sale of single family homes declined during the month by a marginal 1.6% from April. But the number of condos and co-op sales fell a larger 6.8% off-setting the slight drop in single family re-sales.
The median price of existing single family homes were higher in 16 of the 20 large metropolitan statistical areas tracked by the association from one year ago. But the median price only indicates the value of homes that are selling is rising or falling for a market compared to the more dependable
average home price. Average home prices represent a clearer picture of housing data for a market, incorporating all homes that are sold during a period.
Despite fears generated by some economists predicting that home sales would rise more steadily, the housing market is showing an increase in sales from the record downturn nearly a year and a half ago that is likely to be elevated through at least the end of June.