May Home Sales Drop 3.8%June 21, 2011
Home sales fell 3.8% in May, and were more than 15% lower than in May 2010, as severe weather and high gas prices plagued the precarious housing market.
According to the National Association of Realtors (NAR) sales of existing homes fell to a seasonally adjusted annual rate of 4.81 million, down from a revised rate of 5 million in April.
"Spiking gasoline prices along with widespread severe weather hurt house shopping in April, leading to soft figures for actual closings in May," said NAR chief economist Lawrence Yun.
Surging gas prices effected consumer spending overall while tornados and flooding devastated parts of the South and Midwest in May. Home sales fell more than 6% in the South and were down over 5% in the Midwest. By contrast, sales fell 2.5% in the Northeast and were flat in the West.
A glut of foreclosed properties continues to weigh down home prices. In May the national median price for existing homes of all types fell 4.6% to $166,500. Distressed homes accounted for 31% of all sales. According to the NAR, distressed homes typically sell for about 20% less than homes that aren't in foreclosure.
Yun called the drop in May sales "disappointing," but said the long and painful drop in home prices "could be diminishing" as some buyers look to take advantage of what he called the highest affordability conditions in 40 years. But he added that "restrictive loan underwriting standards" are also holding back existing home sales.
"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," said Yun.