Existing home sales rose modestly in May to their highest level since last October, according to a new report, offering further evidence that the housing market is stabilizing.
Following a rise in April, May's 2.4 percent upturn marked the first back-to-back increase in seasonally adjusted monthly sales since 2005, the National Association of Realtors (NAR) reported Tuesday. Nevertheless, at annual rate of 4.8 million units, the level was slightly below analysts' consensus estimate and 3.6 percent below the pace a year ago.
The median sales price of homes showed a similar pattern. The price rose from April to May to reach $173,000, which was still 16.8 percent below the level in May 2008.
Behind the headline numbers were some positive signs. For the first time in months, the share of sales that were distressed fell from 45 percent in April to 33 percent in May. As the industry sells off the overhang of foreclosed properties, median home prices should rise because distressed properties generally sell at a discount, the NAR said.
Also, the inventory of homes for sale fell after a one-month upward blip in April. At the current rate of sales, it would take 9.6 months to sell the total number of homes for sale. The smaller the supply, the more chance that home prices will rise as long as demand stays steady.
A strong rebound in housing faces some continuing obstacles, however. The NAR said home sales would have been stronger, but appraisers were standing in the way of transactions by undervaluing homes.
Another obstacle is the recession. Rising unemployment will make it harder for jobless homeowners to hold on to their properties, warned MFR economist Joshua Shapiro in an analysis. "We look for price pressures to intensify in the middle to upper end of the housing market as these factors begin to prompt increased distressed sales at those price points."