Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, fell 3.8% to a seasonally adjusted annual rate of 4.81 million in May from a downwardly revised 5 million in April, and are 15.3% below a 5.68 million pace in May 2010 when sales were surging to beat the deadline for the home buyer tax credit.
Lawrence Yun, NAR chief economist, said temporary factors held back the market in May, as implied from prior data on contract signings.
"Spiking gasoline prices along with widespread severe weather hurt house shopping in April, leading to soft figures for actual closings in May," he said. "Current housing 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."
"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," Yun added.
Yun said the market also is being constrained by the lending community.
"Even with recent economic softness, this is a disappointing performance with home sales being held back by overly restrictive loan underwriting standards," he said. "There's been a pendulum swing from very loose standards which led to the housing boom to unnecessarily restrictive practices as an overreaction to the housing correction -- this overreaction is clearly holding back the recovery."
There were notable regional differences in home sales.
"A large decline in Midwestern existing-home sales can be attributed partly to the flooding and other severe weather patterns that occurred, but this also implies a temporary nature of soft market activity," Yun explained.
The national median existing-home price for all housing types was $166,500 in May, down 4.6% from May 2010. Distressed homes -- typically sold at a discount of about 20% -- accounted for 31% of sales in May, down from 37% in April; they were 31% in May 2010.
"The price decline could be diminishing, as buyers recognize great bargain prices and the highest affordability conditions in 40 years; this will help mitigate further price drops," Yun said.
"Home prices are rising or very stable in local markets with improved employment conditions, such as in North Dakota, Alaska, Washington, D.C., and many parts of Texas," Yun noted.
NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said a number of proposals being considered in Washington could further jeopardize the housing recovery.
"We're concerned about the flow of available capital, including a possible rule that would effectively raise minimum down payment requirements to 20%," he said.
"We don't need to throw the baby out with the bath water -- increasing down payment requirements would effectively shut many qualified families out of the market," he explained. "What we critically need is a return to the basics of providing safe mortgages to creditworthy buyers willing to stay well within their budget."
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.64% in May, down from 4.84% in April; the rate was 4.89% in May 2010.
"Although low mortgage interest rates are welcome, they are less meaningful compared to the tightness of loan underwriting standards," Yun noted.
Total housing inventory at the end of May fell 1.0% to 3.72 million existing homes available for sale, which represents a 9.3-month supply at the current sales pace, up from a 9-month supply in April.
All-cash transactions stood at 30% in May, down from 31% in April; they were 25% in May 2010; investors account for the bulk of cash purchases.
First-time buyers purchased 35% of homes in May, down from 36% in April; they were 46% in May 2010 when the tax credit was in place. Investors accounted for 19% of purchase activity in May compared with 20% in April; they were 14% in May 2010.
Single-family home sales declined 3.2% to a seasonally adjusted annual rate of 4.24 million in May from 4.38 million in April, and are 15.4% below a surge to 5.01 million one year ago. The median existing single-family home price was $166,700 in May, down 4.5% from May 2010.
Existing condominium and co-op sales fell 8.1% to a seasonally adjusted annual rate of 570,000 in May from 620,000 in April, and are 14.7% below the 668,000-unit pace in May 2010. The median existing condo price was $165,400 in May, which is 5.8% below a year ago.
Regionally, existing-home sales in the Northeast declined 2.5% to an annual level of 770,000 in May and are 13.5% below May 2010. The median price in the Northeast was $241,500, up 6.1% from a year ago.
Existing-home sales in the Midwest dropped 6.4% in May to a pace of 1.02 million and are 22.7% below a year ago. The median price in the Midwest was $136,400, which is 8.5% below May 2010.
In the South, existing-home sales fell 5.1% to an annual level of 1.85 million in May and are 14.4% below May 2010. The median price in the South was $149,200, down 3.1% from a year ago.
Existing-home sales in the West were unchanged at an annual pace of 1.17 million in May but are 10.0% lower than a year ago. The median price in the West was $192,300, which is 12.6% below May 2010.