by Calculated Risk on 6/27/2006 01:58:00 PM

The National Association of Realtors (NAR) reports: Existing-Home Sales Ease In May
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Sales of existing homes experienced a minor decline in May with home prices rising near normal rates, according to the National Association of Realtors®.

Total existing-home sales – including single-family, townhomes, condominiums and co-ops – eased 1.2 percent to a seasonally adjusted annual rate1 of 6.67 million units in May from a pace of 6.75 million in April, and were 6.6 percent below the 7.14 million-unit level in May 2005.

David Lereah, NAR’s chief economist, said conditions are mixed around the country. “There’s now a clear pattern of slower home-sales activity in many higher cost markets, which are more sensitive to rises in interest rates, and higher home sales in moderately priced areas which have experienced job growth,” he said. “Although mortgage interest rates remain historically low, the uptrend in interest rates this year is affecting those buyers who are at the margins of affordability.”
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The national median existing-home price2 for all housing types was $230,000 in May, up 6.0 percent from May 2005 when the median was $217,000. The median is a typical market price where half of the homes sold for more and half sold for less. “Overall price appreciation has returned to normal levels as the supply of homes on the market has risen to a balanced range,” Lereah said.

Total housing inventory levels rose 5.5 percent at the end of May to 3.60 million existing homes available for sale, which represents a 6.5-month supply at the current sales pace.

NAR President Thomas M. Stevens from Vienna, Va., said it’s important to keep the current market in perspective. “We didn’t break the 6-million sales barrier until 2003, so the current level of home sales is still pretty healthy by historic standards,” said Stevens, senior vice president of NRT Inc. “Housing is continuing to support the overall economy by providing a sound foundation for other sectors to grow – the normalization that is taking place in the housing market is good for the long-term health of the industry.”

Existing Home Sales are a trailing indicator. The sales are reported at close of escrow, so May sales reflects agreements reached in March and April.

Usually 6 to 8 months of inventory starts causing pricing problem - and over 8 months a significant problem. Current inventory levels are now in the danger zone.