May Home Sales Dip 1.2%; Downward Trend Eases a Bit

Home sales dropped 1.2% in May, but lower mortgage rates and a small drop in home prices helped slow a monthly decline that has persisted since January, the National Assn. of Realtors said Monday.

The association said the annual sales rate in May for single-family homes was 3.29 million units and represented a much smaller decline than the monthly drops of more than 2% posted since the start of the year.

The May sales rate was an increase of 1.2% from the year-ago period.

The national median price for single-family homes was $94,800 in May, down $800 from April, but up $2,200 from May, 1989.

The median represents the level at which half the homes sold are more expensive and half are less expensive. It is considered the best gauge of the market’s condition.

“Consumers should not associate the ‘credit crunch’ within the real estate industry with individual single-family mortgage loans,” said association President Norman Flynn.

Flynn said that while a tightening of lending by banks was evident, it affected home builders and major real estate projects and not individual home buyers.

He said a drop in interest rates in May brought many buyers, particularly first-time buyers, into the market.

“I think that we’ve got to the point now where rates are low enough so that you’re going to pull some interested buyers back into the market,” said Richard Peach, deputy chief economist of the Mortgage Bankers Assn. of America.

“Our forecast is for them (interest rates) to remain steady, at about where they are now for the remainder of the year,” Peach added.

Mortgage rates dropped by almost half a percentage point in May. Freddie Mac, or the Federal Home Loan Corp., said interest rates for fixed-rate mortgages fell progressively in May, from 10.67% at the start of the month, to 10.33% by May 31.

But the rate is still substantially higher than the 1990 low of 9.80%.

EXISTING HOME SALES

Seasonally, adjusted annual rate, millions of units: May, ‘90: 3.29 April, ‘90: 3.33 May, ‘89: 3.25

Source: National Assn. of Realtors