Home sales pull back in May


Sales of previously owned homes in the U.S. dropped 2.2% in May from the previous month as the stimulus from a popular federal tax credit appeared to wane.

Many economists expected sales and prices to fall as deadlines began to expire for the federal tax credit, which required buyers to enter into a home purchase contract by April 30 and close their deals by June 30. The credits offered up to $8,000 for first-time buyers and $6,500 for some current homeowners. The credit helped fuel sales of new and previously owned homes across the U.S. this spring.

Though down from the previous month, May’s closings reflected a 19.2% gain from May 2009. Patrick Newport, U.S. economist for consultancy IHS Global Insight, sounded an optimistic note Tuesday that the housing market would continue to recover without the government stimulus.

“After a midyear drop, our view is that sales will start growing sustainably as the job market improves,” he said.

Lawrence Yun, chief economist of the National Assn. of Realtors, which reported the sales data Tuesday, said the housing market would probably remain at an elevated level through June. He added that job creation would be key to sustaining a healthy market. And keeping a glut of foreclosed houses off the market is also essential for a continued recovery, Yun said.

The sales pace of previously owned houses, town homes, condominiums and co-ops was estimated at a seasonally adjusted annual rate of 5.66 million units in May, according to the real estate group, down 2.2% from an upwardly revised 5.79 million units in April. The May sales pace was 19.2% above the 4.75-million-unit level in May 2009.

The national median price for previously owned homes was $179,600 in May, up 2.7% from May 2009. The percentage of homes sold that were “distressed,” either bank-owned or sold when the owner was late on their mortgage payments, fell to 31% last month from 33% in April.

Housing inventory fell 3.4% in May to 3.89 million existing homes available for sale, representing an 8.3-month supply at the current pace. Raw unsold inventory rose 1.1% from May 2009 but is still 14.9% below the 4.58-million record set in July 2008.

In the West, sales rose 4.9%. Sales were flat in the Midwest, increased 0.5% in the South and fell 18.3% in the Northeast.