The National Association of Realtors reported slightly higher sales of existing homes last month, up 2.4 percent to a seasonally adjusted, annualized rate of 4.77 units in May after a downwardly revised total of 4.66 million units in April.
Inventory declined modestly as the months of supply metric fell from 10.1 months to 9.6 months, still about double the historical average.
The median sales price rose 3.8 percent in May to $173,000, but the year-over-year change worsened to a decline of 16.8 percent. The realtors' trade group also reported a sharp decline in the number of distressed sales, falling to about one-third of all sales versus the 40 to 50+ percent in recent months.
The increase in sales was less than expected due to "poor" appraisals (i.e., ones that come in too low for the bank to confidently make a loan), NAR Chief Economist Lawrence Yun noting:
Lenders are using appraisers who may not be familiar with a neighborhood, or who compare traditional homes with distressed and discounted sales. In the past month, stories of appraisal problems have been snowballing from across the country with many contracts falling through at the last moment. There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected.
It sounds as though not being familiar with the neighborhood might be a good thing if the aim is to get an objective appraisal and that using distressed sales is exactly the right thing to do since these dominate overall sales activity in many areas.
You just can't win as a real estate appraiser in the 21st century...
Importantly, the now two-month long move up in home sales has occurred during a time that mortgage rates were "freakishly" low. In May, the national average for a 30-year fixed-rate home loan was just 4.86 percent, up slightly from the 4.81 percent average in April, but significantly below the current rate of closer to 5.5 percent.
Next month's report should be full of intrigue regarding if and how higher mortgage rates are affecting the sales of existing homes.
This article can also be viewed at Tim Iacono's blog, The Mess That Greenspan Made.