May Existing-Home Sales Up Again

May Existing-Home Sales Up Again

Sale of existing homes had a second straight increase in May, benefitting from low interest rates and a First Time Home Buyer Tax Credit. Sales increased by 2.4% to a seasonally-adjusted 4.77 million homes, up from 4.66 million in April.

Lawrence Yun, NAR chief economist, expected an improvement. “Historically low mortgage interest rates clearly drew buyers into the market, and housing remains very affordable even with a recent uptick in rates,” he said. “First-time buyers also are being drawn off the sidelines by the $8,000 tax credit, which is helping to absorb inventory. However, the increase in sales is less than expected because poor appraisals are stalling transactions. Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting a loan.”

Housing inventory also fell in May. Inventories were down 3.5% to 3.80 millions homes which is a 9.6 month supply, down from a 10.1 month supply in April.

This is the first time that existing home sales has had a back to back gain since September 2005. It may be too early to say that the housing market it starting to recover but this is a very positive sign.