Sales of existing homes rose slightly in May, only the second increase in the past 10 months. Prices, however, kept plunging and analysts said the large number of unsold homes indicated the prolonged slump in housing was far from over.
The National Association of Realtors reported Thursday that sales of existing single-family homes and condominiums edged up by 2 percent to a seasonally adjusted annual rate of 4.99 million units in May. Even with the small gain, it was still 15.9 percent below the depressed levels of a year ago.
The median price of an existing home sold in May dropped to $208,600, 6.3 percent lower than a year ago. That is the point where half sell for more and half sell for less. It was the fifth biggest year-over-year price decline in records that go back to 1999.
Existing homes sales account for the bulk of the housing market. The report followed news Wednesday that sales of new single-family homes fell by 2.5 percent in May. That was the sixth drop in the past seven months and pushed the annual sales pace down to 512,000 units.
The two-year slump in housing has dragged down the economy and rising levels of foreclosures are dumping even more unsold homes on the market.
Given the weak economy, many analysts said they were not looking for a turnaround in housing for many more months. “Plunging prices and massive inventory are huge disincentives to home buying,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
Economists said that falling consumer confidence, rising job layoffs and higher mortgage rates were standing in the way of a housing rebound. Freddie Mac, the mortgage company, reported on Thursday that mortgage rates rose across the board in the past week. The 30-year mortgage climbed to 6.45 percent, the highest since last September.
“We do not expect residential real estate markets to turn around soon,” said Stuart Hoffman, chief economist at PNC Financial Services. “In a sea of weak data, home sales will remain an anchor, not a life boat.”
The existing homes report found a 5.5 percent increase in the Midwest, followed by gains of 4.6 percent in the Northeast and 2 percent in the West. Sales in the South dropped of 0.5 percent.
Economists with the Realtors noted that for the past few months sales have rebounded in areas hit hardest by the housing bust. Examples included Sacramento, the San Fernando Valley and Monterey in California; Sarasota, Fla.; and Battle Creek, Mich.
“Stabilization in home prices can only occur with buyers returning to the market, so we are encouraged by rising home sales, particularly in distressed markets,” said Lawrence Yun, the Realtors’ chief economist.
Yun said foreclosures and short sales, when a home is sold for less than the value of the mortgage, are a larger portion of the current housing market, particularly in California, and are depressing home prices.
The inventory of unsold homes dropped by 1.4 percent to 4.49 million units in May. That is a 10.8-months supply at the May sales pace, down from 11.2-months in April. That still exceeds the seven-month inventory that is typical.