Jun. 23, 2009 07:21 AM
Home resales in the U.S. rose in May for a second month as record foreclosures caused prices to drop.
Purchases increased 2.4 percent to an annual rate of 4.77 million, lower than forecast, the National Association of Realtors said today in Washington. The median price fell 17 percent, the third-largest decrease on record.
Tax breaks for first-time buyers in the Obama administrations stimulus plan, falling property values and lower mortgage rates have helped support the market. At the same time, any recovery is likely to be limited with unemployment rising and borrowing costs shooting back up.
Were seeing some signs of stability, Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Florida, said before the report. A lot is going to depend on mortgage rates if they stay low. You're still looking at a lot of supply out there and its going to take a long time to work through all of that.
Economists forecast existing sales would rise to a 4.82 million rate, according to the median of 74 projections in a Bloomberg News survey. Estimates ranged from 4.6 million to 5 million. Aprils reading was revised down to a 4.66 million pace from 4.68 million.
Mays sales pace was the strongest since October and last months gain marked the first back-to-back increase since 2005.
May traditionally is one of the top three sales months of the year as the weather turns warmer and families prepare to move before the start of the next school year, according to the NAR. The group adjusts the figures for these seasonal variation in order to facilitate month-to-month comparisons.
Sales were 3.6 percent compared with a year earlier.
The number of houses on the market dropped 3.5 percent to 3.8 million in May, NAR said. At the current sales pace, it would take 9.6 months to sell those homes, compared with 10.1 months in April.
The median price of an existing home fell to $173,000 in May from $207,900 a year earlier, the NAR said. The price has fallen as sales slumped and financial institutions auctioned off foreclosed properties.
While the loss has devastated some family, others were able to buy a house for the first time because of the drop in values. The federal government is trying to stabilize the market by offering lenders incentives to modify the terms of delinquent mortgages and the Federal Reserve has pledged to buy mortgage- backed securities to free up funding for home loans.
The share of homes sold as foreclosures or otherwise distressed properties was about 33 percent last month, down from the 40 percent to 50 percent seen earlier in the year, NAR said.
Foreclosure filings in the U.S. surpassed 300,000 for a third straight month in May and may reach a record 1.8 million by the first half of the year, RealtyTrac Inc. said June 11.
The jump in foreclosures is one of the reasons more first- time buyers have entered the market. First-time buyers accounted for about 29 percent of May sales.
The Obama administrations stimulus plan provided an $8,000 tax credit for first-time home buyers for purchases completed before Dec. 1.
Still, soaring unemployment and high levels of debt will put home ownership beyond the reach of would-be buyers even as home prices fall, according to a report yesterday by Harvard University's Joint Center for Housing Studies.
Mortgage borrowing costs are also starting to climb. The rate on a 30-year fixed loan has averaged 5.42 percent so far this month, up from 4.86 percent in May, according to figures from Freddie Mac. The rate reached 4.78 percent in April, the lowest level since records began in 1972.