The housing market may be on the verge of taking another plunge that could weaken the broader economic recovery. Sales of previously occupied homes are dipping even though buyers can still benefit from government tax credits.
WASHINGTON - The housing market may be on the verge of taking another plunge that could weaken the broader economic recovery.
Sales of previously occupied homes are dipping even though buyers can still benefit from government tax credits. And nearly a third of sales in May were from foreclosures or other distressed properties. That means home prices could be heading downward after stabilizing over the past year.
Last month's sales fell 2.2 percent from the previous month to a seasonally adjusted annual rate of 5.66 million, the National Association of Realtors said yesterday. Analysts who had expected sales to rise expressed concern that the real estate market could tumble once the benefit of the federal incentives is gone entirely, starting next month.
"The outright decline in May sales is stunning given the last-ditch effort on the part of buyers to claim the tax credit," said Sal Guatieri, an economist at BMO Capital Markets.
Sales have climbed 25 percent from the 4.5 million annual rate hit in January, 2009 - the lowest level of the recession. But they're still down 22 percent from the peak rate of 7.25 million in September, 2005.
The May figures are in contrast to home sales in the Toledo area. The Toledo Board of Realtors reported two weeks ago that the number and average prices of homes sold last month in Lucas County and in northwest Ohio had increased.
For the county, sales rose to
396 in May from 389 the month before and 377 a year earlier. For northwest Ohio, sales rose to 692 for May from 608 the month before and 567 a year earlier, the local trade group said. The average sales price was about $102,000 in Lucas County and $110,500 in northwest Ohio.
The national report counts home sales when a deal closes. So federal tax credits of up to $8,000 for home buyers likely influenced May's results. The deadline to get a signed sales contract and still qualify was April 30. Buyers must close their purchases by the end of this month.
The tax credits were expected to lift sales in May and June. Lawrence Yun, the national Realtors chief economist, said delays in the mortgage-lending process put about 180,000 potential buyers in limbo. They are unlikely to qualify by the June 30 deadline. The trade group is pushing Congress to extend the deadline for closing a sale until Sept. 30.
The inventory of unsold homes on the market dropped 3.4 percent to 3.9 million. That's an 8.3 month supply at the current sales pace, compared with a healthy level of about six months. The median sales price in May was $179,600, up 2.7 percent from a year earlier.
First-time buyers made up 46 percent of sales.