Existing Home Sales Drop In May

A monthly report from the National Association of Realtors states that the number of existing home sales fell in May by 3.8% to a seasonally adjusted rate of 4.81 million. This was down from a revised rate of 5 million in April. Compared to May of 2010, this number represents a 15% decrease.

NAR’s chief economist, Lawrence Yun attributes the May drop to spiking gasoline prices and widespread severe weather, which combined to hamper home shopping in April. Regionally, the results were:

- South -6.0%
- Midwest -5.0%
- Northeast -2.5%
- West Flat

The glut of foreclosures has been a weight on prices for a while now, and NAR states that the national median price for all types of existing homes fell 4.6% in May to $166,500. Sales are expected to pick up during the last half of the year in conjunction with lower gas prices.

In May, distressed homes accounted for 31% of all sales. With the typical distressed house selling for an average of around 20% less than non-foreclosure homes, this puts significant downward pressure on prices. While foreclosures have slowed in recent months due to fallout from the robo-signing problems, banks are expected to overcome those issues and resume at a more normal pace soon.

Of no help in this situation is the overreaction in the lending arena. The lax standards in mortgage lending pre-2007 were one end of the pendulum swing, while many consider the tight rules now as too restrictive.