Posted on Thursday, June 30, 2011
Distressed properties accounted for just 31 percent of existing-home sales in May, the National Association of Realtors (NAR) reported Tuesday.
The ratio of distressed homes – typically bank-owned or pre-foreclosure short sales – took a dive last month compared to earlier in the year. May’s market share is down from 37 percent in April and 40 percent in March. However, it’s right on target with May 2010, when distressed properties made up 31 percent of the month’s sales.
Clear Capital says all spring and summer seasons, even since the 2006 downturn, see an increase in non-distressed sales volume, so a decline in the relative proportion of REO and short sales is pretty standard.
But last month, overall sales of previously owned homes dropped along with the distressed percentage.
NAR says its measurement of existing-home sales, which is based on transaction closings, fell 3.8 percent in May to a seasonally adjusted annual rate of 4.81 million and its lowest mark in six months.
The previous month’s figures were revised downward to reflect a 5.00 million annual sales pace. May’s numbers are 15.3 percent below the 5.68 million pace of May 2010 when sales were buoyed by the approaching deadline for the federal homebuyer tax credit.
The latest results from NAR were largely in line with market expectations. Median forecasts pegged the annual sales rate to come in at about 4.80 million. The number to hit for a “healthy market,” analysts say, is 6 million.
Total housing inventory at the end of May fell 1.0 percent to 3.72 million existing homes available for sale,
according to NAR’s report. That figure represents a 9.3-month supply at the current sales pace, up from a 9.0-month supply in April.
NAR’s data show that the national median price for existing homes sold last month was $166,500, 4.6 percent below the median price from a year earlier.
“Current housing market activity indicates a very slow pace of broader economic activity,” said Lawrence Yun, NAR’s chief economist. “The pace of sales activity in the second half of the year is expected to be stronger than the first half, and will be much stronger than the second half of last year.”
But for now, Yun blames the lending community and tight credit for restraining market activity.
“There’s been a pendulum swing from very loose standards which led to the housing boom to unnecessarily restrictive practices as an overreaction to the housing correction – this overreaction is clearly holding back the recovery,” he said.
Patrick Newport, U.S. economist with the research firm IHS Global Insight, disagrees with Yun’s charges. Newport says it all boils down to a lack of buyer demand.
“Indeed, one reason credit is tight is because the demand is weak,” Newport explained.
“This has led to falling house prices. Lenders have responded by tightening lending standards, since the collateral is losing value off the bat. Buyers have responded by sitting on the sidelines,” despite the improvement in housing affordability, Newport said.
NAR’s study showed that all-cash transactions stood at 30 percent in May, down from 31 percent in April. They were 25 percent in May 2010.
First-time buyers purchased 35 percent of the existing homes sold in May, down from 36 percent in April. They were 46 percent in May 2010 when the tax credit was in place.
Investors accounted for 19 percent of purchase activity in May compared with 20 percent in April and 14 percent in May 2010.
Regionally, NAR reported that existing-home sales were down in the Midwest, South, and Northeast, and flat in the West.
By: Carrie Bay DS NEWS