Sales of existing-home sales increased in May with buyers responding to lower home prices.

Existing-home sales increased 2 percent to a seasonally adjusted annual rate of 4.99 million units in May from a level of 4.89 million in April.
NAR President Richard F. Gaylord says buyers are seeing value in the current housing market. “Home buyers are starting to get off the fence and into the market, drawn by drops in home prices in many areas and armed with greater access to affordable mortgages,” he says. “Today’s buyer plans to stay in a home for 10 years, which is a good strategy for building long-term wealth.”

Housing Inventories

Lawrence Yun, NAR chief economist, says there’s still a lot of inventory in the market. “The large supply of homes on the market clearly favors buyers, and it should take several months to draw the inventory down,” he says. “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. Foreclosures and short sales appear to be a larger part of the market, particularly in California, and are creating a drag on current home prices.”

Sales Activity Picks Up

Although conditions remain mixed around the country, unpublished snapshot data shows a number of areas are experiencing much higher sales activity than May 2007, including Sacramento, the San Fernando Valley and Monterey County in California; Sarasota, Fla.; and Battle Creek, Mich.

“Keep in mind that the volume of home sales is the primary driver of economic activity that is tied to housing,” Yun says. “It’d be premature to say the improvement marks a turnaround. The market is fragile, so a first-time home buyer tax credit and a permanent raise in loan limits would be important steps to get the housing engine humming.”

Single-family home sales rose 1.6 percent to a seasonally adjusted annual rate of 4.41 million in May from 4.34 million in April, but are 14.5 percent below the 5.16 million-unit pace in May 2007.

By Region

Midwest: rose 5.5 percent in May to a pace of 1.16 million but are 16.5 percent lower than a year ago. Median price: $165,300, which is 0.7 percent below May 2007.

Northeast: rose 4.6 percent to an annual rate of 910,000 in May, but are 15.0 percent below May 2007. Median price: $278,000, down 2.4 percent from a year ago.

West: increased 2 percent to an annual pace of 1.02 million in May, but are 12.8 percent below a year ago. Median price: $286,600, which is 16 percent lower than May 2007.

South: slipped 0.5 percent to an annual rate of 1.91 million in May, and are 17 percent below May 2007. Median price: $175,000, down 4.3 percent from May 2007.

Source: NAR

Mortgage Interest Rates rise to a 8 Month High

Speculation that the central bank could reverse its rate cutting campaign later this year as a way to keep inflationary pressures in check drove up mortgage borrowing costs during the past week, according to Freddie Mac.

Interest on 30 year loans settled at 6.32 percent in the latest survey, climbing from 6.09 percent the previous week to the highest level seen in eight months.

Meanwhile, rates on 15 year fixed loans moved up to 5.93 percent from 5.65 percent for the week; while one-year adjustable-rate mortgages drifted up to 5.09 percent from 5.06 percent. Five-year ARMs floated up to 5.70 percent from 5.51 percent.

Experts and analysts agree that the foundation for a healthy housing market is in place: low interest rates, a low unemployment rate, a rising population, and increasing wealth. With home prices at 2002 and 2003 levels, the stage is set for a large rebound.

“When the market recovers, home prices will march right back up quickly.”

In the meantime, experts called the current housing crisis the worst he’s seen since the mid-1970s, and a longer lasting one. But they blamed buyers’ lack of confidence that home prices will stabilize, not the credit crisis for the slower market.

Homeownership is an investment in your future. It provides security and shelter, fosters involvement in community, and provides important economic and social benefits.

Homeowners are more likely to vote and volunteer time for political and charitable causes then renters are.

Home Owners move less frequently than renters, providing more family stability. As a result, involvement in community, as well as quality of life issues helps prevent crime, improve childhood education, and supports neighborhood upkeep.

Homeowners typically reside in their home around 6 years.

Homeowners benefit from the power of leverage. Over 10 years a $10,000 investment in the stock market at a normal 10% market rate of return would return a yield of around $23,600,  The same investment as a down payment on a $200,000 home, at normal appreciation rates of around 5%, would return nearly 5 times the stock market or around $110,300 dollars.

Time to invest in a home and yours and your families future?

A flat pattern in home sales activity should continue for the next couple months before improving over the summer, according to the latest forecast. Lawrence Yun, NAR chief economist, said the extent of an expected recovery hinges on better access to affordable loans. “Things are beginning to improve, but the availability of affordable mortgages is uneven around the country and sometimes within metropolitan areas,” he said. “As anticipated, we continue to look for a soft first half of the year, for both housing and the economy, before notable improvements in the second half. Some time is needed for FHA and new conforming jumbo loans to become widely available.