Home resales in May up 4.9% in slow year

A pedestrian walks past a Sotheby's "For Sale" sign displayed outside of a townhouse in New York, U.S., on Monday, June 23, 2014. Americans snapped up previously owned homes in May in the biggest monthly sales gain in almost three years, a sign the residential real estate market is regaining its footing after a stumble early in the year. Photographer: Craig Warga/Bloomberg

A pedestrian walks past a Sotheby's "For Sale" sign displayed outside of a townhouse in New York, U.S., on Monday, June 23, 2014. Americans snapped up previously owned homes in May in the biggest monthly sales gain in almost three years, a sign the residential real estate market is regaining its footing after a stumble early in the year. Photographer: Craig Warga/Bloomberg

Tuesday, June 24, 2014

WASHINGTON -- Purchases of previously owned U.S. homes rose in May by the most in almost three years, the National Association of Realtors reported Monday.

The group said sales of existing homes increased 4.9 percent last month to a seasonally adjusted annual rate of 4.89 million homes. The monthly gain was the fastest since August 2011, but even with the increase, sales are still 5 percent below the pace in May 2013.

"Sales appear to be moving up again, although the increase to date -- over two months -- reverses just a fraction of earlier weakening," Jim O'Sullivan, chief U.S. economist at High Frequency Economics, said in a research note.

Sales had been dampened by last year's rise in mortgage rates from historic lows, tight supplies and tougher lending standards.

The median price of a home sold in May was $213,400, up 5.1 percent from a year ago.

"I'm confident that the housing recovery is going to continue," said Tom Simons, an economist at Jefferies LLC in New York, who projected sales would rise to a 4.8 million pace. "Income levels are going up, [interest] rates are at least not going up anymore, and prices are stabilizing, so all that blends into a good picture for affordability."

Arkansas home sales, including previously owned and new homes, rose 5.8 percent in May, the Arkansas Realtors Association said Friday. The average home price in the state fell slightly to $160,450.

There were 2,666 homes sold last month in the 43 Arkansas counties that report to the association, up from 2,521 in May 2013.

Home sales jumped 15 percent in Pulaski County to 483 sales in May, the highest county total in the state. Benton County saw 440 sales in May, followed by Washington County with 215, Saline County with 158 and Sebastian County with 143.

After hitting a recent peak of an annual rate of 5.33 million sales last summer, U.S. sales started sliding. Potential buyers have been grappling with a limited supply of houses, more expensive homes and lending standards that have been tightened in response to the housing boom of the past decade, which resulted in millions of houses going into foreclosure.

Five years into the recovery from a recession that was triggered in part by the collapse in housing, sales have yet to return to their historic averages. Demand remains strong for the most expensive homes but has faltered for starter homes and those priced for middle-class buyers.

The pace of home sales is below the 5.1 million homes sold in 2013 and off the pace of 5.5 million annual sales that would be consistent with a healthy housing market.

Lawrence Yun, chief economist for the National Association of Realtors, said because of the weaker start to sales this year, he expects sales for the entire year will be down 3.1 percent to 4.9 million, compared with 5.1 million sales of existing homes in 2013, which had been a 9.2 percent rise from 2012.

Yun predicts a stronger second half for sales, but he said that would not be enough to compensate for the weakness at the start of this year, a slowdown that reflected a harsh winter.

Sales of existing homes began to slow in the second half of 2013 as mortgage rates crept up from historic lows, but home prices continued to rise due to a lack of available homes for sale.

Average rates for 30-year, fixed-rate mortgages declined to 4.17 percent last week, down from 4.20 percent the previous week. Mortgage rates are about a quarter of a percentage point higher than they were at the same time last year.

Yun forecasts that mortgage rates will rise at the end of this year as the Federal Reserve moves closer to boosting interest rates. He predicts rates will average 4.9 percent in the last three months of 2014 and 5 percent in the first quarter of 2015.

The inventory of homes for sale at the end of May climbed 2.2 percent to 2.28 million homes, which represents an almost six-month supply at the May sales pace. Inventory is 6 percent higher than a year ago, which analysts said should help to slow price gains and boost sales by giving would-be buyers more homes from which to choose.

Information for this article was contributed by Martin Crutsinger of The Associated Press; by Shobhana Chandra and Ainhoa Goyeneche of Bloomberg News; and by David Smith of the Arkansas Democrat-Gazette.

A Section on 06/24/2014