Existing Home Sales Pick Up, Helped by Bargain Prices

MBA (6/27/2008 ) Velz, Orawin
Total existing home sales increased 2.0 percent in May to a seasonally-adjusted annualized rate of 4.99 million, as both single-family home sales and condo sales were up.

Single-family home sales rose 1.6 percent, while condo sales jumped 5.5 percent, reversing the 5.2 percent drop in the previous month.

While existing home sales have changed little since the beginning of this year, they have declined significantly from a year ago. Sales of single-family homes during the first five months of this year were down 19.1 percent from those during the same period last year. The decline in condo sales have been more pronounced, with year-to-date condo sales 26.6 percent lower than those last year.

Existing home sales increased in three regions: 4.6 percent in the Northeast; 5.5 percent in the Midwest; and 2.0 percent in the West. Sales edged down 0.5 percent in the South.

During the current housing downturn, existing-home sales have performed considerably better than new-home sales, which saw a year-to-date drop of 37.5 percent.

One explanation is foreclosure or distressed sales—estimated to account for nearly a third of the market—according to the National Association of Realtors. Foreclosed homes are usually sold at a deep discount, helping to lure buyers back into the market.

While the median price for total existing homes for the nation fell 6.3 percent in May from a year ago, the decline was 16.0 percent in the West region, which is experiencing the highest foreclosure rate in the nation.

Inventory modestly improved during the month. Following the 10.5 percent jump in April, the number of total homes available for sale fell 1.4 percent in May.(The data are not seasonally-adjusted.) A faster sales pace and a drop in inventory pushed down the months’ supply of total existing homes to 10.8 from 11.2 months in April. The months’ supply for single-family homes was 10.4 months in May, compared with 8.7 months a year ago. The months’ supply for condos rose to 14.2 months in May from 10.1 month a year ago.

The Treasury markets rallied and yields moved lower as investors sought safe havens from the plummeting stock markets.

Stocks tumbled in response to record oil prices and credit market writedowns. The yield on the 10-year Treasury note stayed around 4.04 percent by mid-Thursday afternoon—four basis points lower than the rate on Wednesday.