WASHINGTON -- Fewer people purchased previously occupied homes in May, bringing sales down to their lowest level of the year.
Home sales sank 3.8% last month to a seasonally adjusted annual rate of 4.81 million homes, the weakest pace since November, the National Association of Realtors said Tuesday. Economists say that's far below the 6 million homes per year sold in healthy housing markets.
Since the housing boom went bust in 2006, sales have fallen in four of the past five years. They hit a 13-year low last year.
First-time homebuyers ticked down to 35% of sales. First-timers typically drive half of sales in healthy markets and they are critical because they typically improve their properties and invest in their communities, a combination that helps home values rise.
The median sales price for a previously occupied home in May was $166,500. That's 4.6% lower from the same month one year ago. The median price of a new home is nearly 31% higher than the median price for a re-sale, twice the normal markup.
The gap is largely because of the flood of foreclosures or short sales -- when the lender accepts less than what is owed on the mortgage. Those sales are forcing down prices.
Sales of homes at risk of foreclosure fell in May. But they still made up 31% of all purchases. And a large number of pending foreclosures are backlogged in the courts or held up by state and federal probes into troubled foreclosure practices by lenders.
A record 1 million homes were lost to foreclosures last year and foreclosure tracker RealtyTrac Inc. expects 1.2 million more will be lost this year.
Another problem for the housing market is the glut of unsold homes. In May, the supply fell slightly to 3.72 million homes. At last month's sales pace, it would take more than 9 months to clear those homes. Homes priced for less than $100,000 are selling briskly but more expensive homes are having trouble finding buyers. Analysts say a healthy supply can be cleared in six months.
The situation is much worse when taking into account the "shadow inventory" of homes, economists say. These are homes that are in the early stages of the foreclosure process but, because of backlogged courts or the government probes, have not hit the market for re-sale.
Sales fell across most regions of the country. In May, sales dropped 6.4% in the Midwest, 5.1% in the South and 2.5% in the Northeast. There was no change in the West.
Associated Press Jun. 21, 2011 08:17 AM
Home sales at 2011 low as few first-time buyers make deals
