Existing Home Sales Slack Off in May

It couldn't be called a surprise, but it was unwelcome news all the same when the National Association of Realtors reported on Tuesday that the sale of existing homes dropped 2.2 percent in May to an annualized rate of 5.66 million.

June 23, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user Casey Serin

It couldn’t be called a surprise, but it was unwelcome news all the same when the National Association of Realtors reported on Tuesday that the sale of existing homes dropped 2.2 percent in May to an annualized rate of 5.66 million. The federal homebuyer tax credit ended April 30 in the sense that buyers had to ink a deal by then, and that apparently knocked the wind out of the market.

On the other hand, sales during May 2010 were 19.2 percent higher than sales in May 2009. Also, the national median existing-home price for all housing types was $179,600 this May, up 2.7 percent from the same month a year ago. Distressed homes slipped to 31 percent of sales last month, compared with 33 percent in April; it was also 33 percent in May 2009.

NAR is pushing for an extension, to September 30, of the period during which buyers have to close their purchases to take advantage of the tax credit; the deadline is currently June 30. “Approximately 180,000 home buyers who signed a contract in good faith to receive the tax credit may not be able to finalize by the end of June due to delays in the mortgage process, particularly for short sales,” said the organization’s chief economist, Lawrence Yun, in a statement.

Nation’s Housing Report Offers Good News — Some Years From Now

The U.S. Green Building Council and the Joint Center for Housing Studies of Harvard University released a study on Tuesday, “The State of the Nation’s Housing 2010,” and the two organizations concluded, like the old joke that begins in a doctor’s office, that there’s good news and bad news.

First, the bad news. “One of the biggest drags on the housing market is the high joblessness rate,” the report noted. “With more than 7.8 million fewer establishment jobs than in December 2007, unemployment held at 9.9 percent in April 2010. If the past is any guide, the strength of the housing recovery will depend most on the bounceback in employment growth… [but] most economists predict that the unemployment rate remain elevated.”

Also, “many current owners are effectively trapped in homes that are worth less than the amount owed on their mortgage,” the report said. “If these distressed owners want or need to sell, their only choices are to walk away from their homes or write a check at the closing table. This will inhibit a recovery in repeat home sales.”

And the good news? Look ahead: “Even if immigration falls to half the Census Bureau’s current projected rate, household growth will still average about 1.25 million annually. This low-end estimate puts household growth in the next 10 years on par with the pace in 1995-2005, and should support average annual housing completions… of well over 1.7 million units.”

Consumers Spend More to Go Places

An optimistic stat on consumer spending released on Tuesday by the Bureau of Economic Analysis noted that Americans spent 3.9 percent on tourism during 1Q10, seasonally adjusted, than they did in 4Q09. Lodging spending rose at 11 percent and food service spending were up 6.5 percent.

Air travel spending was up too, by 4.5 percent, though other forms of transportation spending saw a 2.6 percent decline. Still, there’s some measure of optimism in the fact that more people are getting on planes, going to hotels, and spending money on eating, drinking and maybe even being merry while at those hotels now.

Wall Street didn’t share that kind of optimism on Tuesday, with the Dow Jones Industrial Average slumping 148.89 points, or 1.43 percent. The S&P 500 declined 1.61 percent and the Nasdaq was down 1.19 percent.