Home Resales In May Increase 2.4%

Source : The Business Times, June 24, 2009

LATEST US DATA

(WASHINGTON) Home resales in the US rose in May for a second month as record foreclosures caused prices to drop.

Purchases increased 2.4 per cent to an annual rate of 4.77 million, lower than forecast, the National Association of Realtors (NAR) said yesterday. The median price fell 17 per cent, the third-largest decrease on record.

Tax breaks for first-time buyers in the Obama administration's stimulus plan, falling property values and lower mortgage rates have helped support the market. At the same time, any recovery is likely to be limited with unemployment rising and borrowing costs shooting back up.

'We're seeing some signs of stability,' Scott Brown, chief economist at Raymond James & Associates in St Petersburg, Florida, said before the report.

'A lot is going to depend on mortgage rates if they stay low. You're still looking at a lot of supply out there and it's going to take a long time to work through all of that.'

Economists forecast that existing sales would rise to a 4.82 million rate, according to the median of 74 projections in a Bloomberg News survey. Estimates ranged from 4.6 million to five million. April's reading was revised down to a 4.66 million pace from 4.68 million.

May's sales pace was the strongest since October and last month's gain marked the first back-to-back increase since 2005.

May traditionally is one of the top three sales months of the year as the weather turns warmer and families prepare to move before the start of the next school year, according to the NAR. The group adjusts the figures for these seasonal variation in order to facilitate month-to-month comparisons.

Sales were 3.6 per cent compared with a year earlier.

The number of houses on the market dropped 3.5 per cent to 3.8 million in May, NAR said. At the current sales pace, it would take 9.6 months to sell those homes, compared with 10.1 months in April.

While the loss has devastated some families, others were able to buy a house for the first time because of the drop in values. The federal government is trying to stabilise the market by offering lenders incentives to modify the terms of delinquent mortgages and the Federal Reserve has pledged to buy mortgage-backed securities to free up funding for home loans. -- Bloomberg