Sales of previously occupied homes dipped in May, even though buyers could receive government tax credits. And nearly a third of sales in May were from foreclosures or other distressed properties. That means home prices could soon be heading down 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 Tuesday. Analysts who had expected sales to rise expressed concern that the real estate market could tumble once the benefit of the federal tax incentives is gone entirely, starting next month.
The report is "a worrisome sign for what will occur in July and thereafter when the effect of the tax credit is behind us," said Joshua Shapiro, chief U.S. economist at MFR Inc., an economic consulting firm in New York.RelatedBorrowers abandon mortgage-modification programFed won't raise interest rates and risk rattling the recoveryHome construction fails to lift recoveryAmericans' net worth rebuilds slowly, unevenlyHome sales continue to riseHome foreclosure rate holds steady in May
Still, most economists don't expect the housing market to be weak enough to pull the economy back into recession. They anticipate that home sales will dip over the summer, then start growing by fall as the 9.7 percent unemployment rate begins to decline.
Existing home sales have climbed 25 percent from the 4.5 million annual rate they 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 report counts home sales once a deal closes. So federal tax credits of up to $8,000 for first-time buyers and up to $6,500 for existing homeowners helped prop up sales in May. The deadline to get a signed sales contract and qualify was April 30. Buyers must close their purchases by June 30.
The tax credits were expected to lift sales in May and June.
Lawrence Yun, the 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.
Associated Press writer Alex Veiga in Los Angeles contributed to this report.
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