Sales of existing U.S. homes decreased in May to the lowest level in six months, a sign that the housing market is lagging other parts of the economy.
Purchases of existing homes fell 3.8 percent to a 4.81 million annual pace last month, in line with the 4.8 million median estimate in a Bloomberg News survey of economists, data from the National Association of Realtors showed today in Washington. Preliminary figures showing a jump in contract signings suggest May will prove to be the weakest sales month of the year, according to the group’s chief economist.
An unemployment rate hovering around 9 percent and tight credit standards mean it may take years to absorb the 1.8 million distressed properties on the market that are weighing down home values. Persistent weakness in the housing market is one reason why Federal Reserve policy makers are likely to maintain record stimulus when they meet this week.
“There is no real let-up in the weakness,” said David Semmens, an economist at Standard Chartered Bank in New York. “Distressed sales are going to be weighing down prices further.”
The median sales price declined from a year earlier and 31 percent of transactions were of distressed dwellings.
Stocks advanced, sending the Standard & Poor’s 500 Index higher for a fourth day, as concern about Greece’s debt crisis eased. The S&P 500 climbed 1.3 percent to 1,295.52 at the 4 p.m. close in New York.
Estimates for home sales ranged from 4.5 million to 5.18 million, according to the median of 69 forecasts in the Bloomberg survey. Purchases reached a record 7.08 million in 2005, and slumped to a 13-year low of 4.91 million last year.
Of all purchases, cash transactions accounted for about 30 percent, NAR chief economist Lawrence Yun said in a news conference today as the figures were released. The Realtors group began tracking the monthly figure in August 2008, and the share on a yearly basis before that was around 10 percent, Yun has said.
Distressed sales, which comprise foreclosures and short sales, in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for a smaller share of the total in May than in recent months because the market for non-distressed properties is usually stronger during this time of year, Yun said.
May sales will probably turn out to be “the low point of the year,” Yun said in the press conference. Pending sales, which are based on contract signings, look to be up around 15 percent for May, Yun said based on incomplete data. The report is due next week.
Existing-home sales decreased in three of four regions in May, led by a 6.4 percent drop in the Midwest.
The median sales price fell 4.6 percent last month from May 2010 to $166,500.
The number of previously owned homes on the market fell to 3.72 million in May from 3.76 million the previous month. At the current sales pace, it would take 9.3 months to sell those houses, compared with 9 months at the end of April. Supply in the eight months to nine months range is consistent with stable home prices, the group has said.
The 1.8 million of inventory of distressed homes nationwide would take about three years to sell at the current pace, Daren Blomquist, communications manager at RealtyTrac Inc., said last week.
Competition from existing homes selling at discounted prices is hurting builders. Sales of new properties dropped 5.3 percent in May to a 306,000 annual pace, economists said ahead of a June 23 report from the Commerce Department. A record-low 323,000 new homes were sold last year.
“We still see housing demand at very weak levels,” Bill Wheat, chief financial officer at D.R. Horton Inc. the second-largest U.S. homebuilder by revenue, said last month at a housing conference in New York. “It could still be a struggle in 2012.”
Fed Chairman Ben S. Bernanke has been among those forecasting that the recent slowdown in growth will prove temporary as commodity prices retreat. At the same time, the central bank should maintain record stimulus to bolster a “frustratingly slow” recovery, he said this month. Officials are scheduled to meet in Washington today and tomorrow to determine the course of policy.