Existing Home Sales Rise Tepidly In May

Sales of existing homes rose a less-than-expected 2.4 percent in May compared to April, the National Association of Realtors reported moments ago.

The May sales rate converts to an annual sales rate of 4.77 million homes. Analysts surveyed by Thomson Reuters expected May to produce an annual rate of 4.81 million homes.

The median sales price in May was $173,000, down from $207,900 in May of last year, but up from $166,600 in April.

Though a rise is better than a decline, don't get too excited: Most of the sales are coming from the low-end: investors and speculators snapping up foreclosed and other distressed properties. Some of the surge comes from buyers taking advantage of the first-time buyer tax credit, which expires this fall.

Home buyers are still not buying large houses -- at least partly because the securitization market for jumbo mortgages has not returned -- and there is still very little "organic" activity, or homeowners trading up to bigger homes, common in a robust economy.

There is currently about a 10-month inventory of unsold new homes. Until that gets sold down, or bulldozed, to about a six-month supply, there can be no real recovery in the housing sector.

-- Frank Ahrens
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