Sales of existing homes fell 3.8 percent in May, not as deep a drop as some had forecast, to a seasonally adjusted annual rate of 4.81 million units.
April's figure was revised down to 5 million.
Potential homebuyers continue to be held back by tough credit standards and poor confidence. Sales activity was 15.3 percent below the pace set in May of 2010, when buyers were rushing to take advantage of the home buyer tax credit.
“Spiking gasoline prices along with widespread severe weather hurt house shopping in April, leading to soft figures for actual closings in May,” said Lawrence Yun, chief economist for the National Association of Realtors.
The national median existing-home price for all housing types was $166,500 in May, down 4.6 percent from May 2010. Home prices continue to be pressured by the large supply of distressed properties, which typically sold at a discount of about 20 percent in May. Foreclosures and short sales, where the home is sold for less than the value of the mortgage, accounted for 31 percent of sales in May, down from 37 percent in April.
"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. Distressed sales vary market to market, with some of the hardest hit areas of the housing crash seeing far higher shares of these purchases. That may be a factor in regional sales differences.
Regionally, existing-home sales in the Northeast declined 2.5 percent, in the Midwest dropped 6.4 percent and were down 5.1 percent in the South. Sales, however, were unchanged in the West, where distressed sales are a far higher percentage of the market, and where investors are out in force.
Total housing inventory at the end of May fell 1.0 percent to 3.72 million existing homes available for sale, which represents a 9.3-month supply at the current sales pace, up from a 9.0-month supply in April.
With credit still tight, and investors, who largely use cash, making up a third of the market, all-cash transactions stood at 30 percent in May, down from 31 percent in April but up from 25 percent a year ago.
First-time buyers purchased 35 percent of homes in May, down from 36 percent in April; they were 46 percent in May 2010 when the tax credit was in place. Investors accounted for 19 percent of purchase activity in May compared with 20 percent in April; they were 14 percent in May 2010.
Single-family home sales declined 3.2 percent while sales of existing condominiums fell 8.1 percent month-to-month.
“Even with recent economic softness, this is a disappointing performance with home sales being held back by overly restrictive loan underwriting standards,” Yun 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.”