USA Today
WASHINGTON (AP) — Sales of existing homes fell for a third time in the past five months in May, with the weakness led by a big drop in demand in the Northeast.
The National Association of Realtors said Tuesday that sales of previously owned homes dropped 1.2% in May from April, to a seasonally adjusted annual rate of 6.67 million units.
The median price of the homes sold in May rose to $230,000, up 6% from the same month a year ago. That represented a slowdown from double-digit price gains last year, the peak of the housing boom.
The NAR report showed that the number of homes still on the market at the end of May climbed to an all-time high for the month of 3.6 million units. The number of months it would take to exhaust that inventory level at the May sales pace would be 6.5 months, highest level since May 1997.
Analysts say they believe home sellers in many parts of the country will soon start to trim their asking prices in response to the rising level of unsold homes. That will help boost sales.
David Lereah, chief economist for the Realtors, says he expects a housing slowdown but not a housing collapse as a strong economy keeps demand for homes at a solid level.
“Right now we are on course for a soft-landing in housing,” he said.
He said 30-year mortgages, which currently average 6.71%, could climb to 7% by the end of the year or even higher if the Fed goes farther in boosting interest rates than currently expected.
Fed officials are expected to increase their target for a key rate a 17th time when they meet Wednesday and Thursday.
By region, sales fell most in the Northeast, a drop of 4.2%. Sales were down 3.8% in the Midwest.
Sales of existing homes managed to post fractional gains of 0.7% in the West and 0.4% in the South.
Analysts say this is a classic pattern for a cooling housing market, with sales starting to lag under the impact of rising mortgage rates.
Lereah says he expected sales to fall 6.8% from last year’s record pace. Sales had surged to record levels for five consecutive years as buyers responded to the lowest mortgage rates in four decades.
But with mortgage rates climbing steadily under the impact of credit tightening by the Federal Reserve, analysts look for housing to slow this year.