By Mike Colpitts
Hindered by financing problems and weak consumer confidence, existing home sales declined in May, falling 3.8% to a seasonally adjusted annual rate of 4.81 million units, and are more than 15% behind last year’s pace, according to the National Association of Realtors.
The slowdown in sales comes at a time when growing doubts about the U.S. economy recovering from its worst recession since at least the Great Depression persist. However, the decline may not be as poor as statistics indicate given the fact that last year at this time the federal government was offering a federal tax credit to home buyers to increase sales.
Higher gas and grocery prices also provide growing doubts about the nation’s economy as the value of most U.S. homes continues to decline. Home sales were at an annualized rate of 5.68 million in May 2010, but the government’s tax credit did little to produce a revival of the housing market.
“Current real estate market activity indicates a very slow pace of broader economic activity, but recent reversals in oil prices are likely to mitigate the impact going forward,” said NAR chief economist Lawrence Yun. “The pace of sales activity in the second half of the year is expected to be stronger than the first half, and will be much stronger than the second half of last year.”
The housing market is also being slowed by tough mortgage financing options, which are eliminating a large volume of potential mortgage borrowers and appraisals that fall short of the agreed upon selling prices.
Other factors also contribute to the markets sluggishness. Flooding along the Mississippi River, effecting parts of Mississippi, North Dakota, Iowa and other states are making it difficult for many areas of the country. Tornadoes ravaged Alabama and other states in the South to cause additional slowdowns.
The national median home price for all housing types, including single family homes, condos and town-houses fell to $166,500 in May, a 4.6% drop in the last year.
Foreclosures and bank-assisted short sales account for 31% of sales during the month, a decline from 37% in April when more foreclosures were on the market listed for sale. The drop in availability of foreclosures, however, is expected to be short-lived as banks and mortgage servicing companies come to grips with legal problems that have halted many foreclosures in light of the robo-signing scandal.