US existing home sales rose 2.4 percent in May, marking the first back-to-back monthly increase since 2005, an industry group said Tuesday in a sign the troubled sector was steadying.
The National Association of Realtors attributed the increase to "favorable affordability conditions and a first-time buyer tax credit" offered by the US government.
"Historically low mortgage interest rates clearly drew buyers into the market, and housing remains very affordable even with a recent uptick in rates," said Lawrence Yun, the group's chief economist.
"First-time buyers also are being drawn off the sidelines by the 8,000-dollar tax credit, which is helping to absorb inventory. However, the increase in sales is less than expected because poor appraisals are stalling transactions."
The group also reported a decline in the glut of unsold homes.
The NAR said total housing inventory at the end of May fell 3.5 percent to 3.80 million homes available for sale, which represents a 9.6-month supply at the current sales pace, down from a 10.1-month supply in April.
By Brian Louis and Kathleen M. Howley
June 23 (Bloomberg) -- U.S. home prices fell 6.8 percent in April from a year earlier as rising unemployment and record foreclosures kept buyers out of the market.
Measured monthly, the average price fell 0.1 percent from March, the Federal Housing Finance Agency in Washington said today. The number was projected to drop 0.4 percent in April, according to the median forecast of 15 economists in a Bloomberg survey.
The housing slump has reduced the median price of an existing home 26 percent from the July 2006 peak, pushing affordability to near record levels. Prospective buyers are now being constrained by rising mortgage rates, the highest unemployment since 1983 and concern the housing rebound will be anemic.
While U.S. builders increased housing starts by 17 percent in May to an annual rate of 532,000, a May 26 report from S&P/Case-Shiller showed home prices in 20 U.S. metropolitan areas fell 18.7 percent in March from the same month last year.
All signs point to further declines. Yale University Professor Robert Shiller, co-founder of the S&P/Case-Shiller index, said earlier this month that prices will continue to fall, contributing to a prolonged recession.
Deutsche Bank AG analysts last week said that U.S. home prices may fall another 14 percent before reaching a bottom as an increase in the jobless rate offsets lower prices. The worse declined may hit the New York and Orange County, California, metropolitan areas, analysts led by Karen Weaver said.
Buyers and those seeking to refinance are also being sidelined as the 30-year fixed loan rate has risen this month to 5.74 percent, the highest since November, according to data from Bankrate.com.
The Federal Reserve is trying to keep rates low and spark a housing recovery by purchasing as much as $1.25 trillion in mortgage-backed securities to free up funding for home loans.
Home-loan rates fell to a record low twice in April helped by the Fed’s buying. Mortgage rates started climbing in May along with Treasury yields on investor concern that a greater supply of government debt being sold to fund federal spending will fuel inflation.
The average 30-year mortgage rate was 5.38 percent last week, down from 5.59 percent a week earlier, according to McLean, Virginia-based mortgage buyer Freddie Mac.
President Barack Obama has pledged to spend $275 billion to help keep as many as 9 million Americans in their homes. The government is also offering a tax break of as much as $8,000 for first-time homebuyers and incentives to lenders to modify delinquent home-loans.
Those efforts may not be able to keep up with the rising number of Americans falling behind on their mortgages. U.S. foreclosure filings are forecast to hit a record 1.8 million in the first half of this year, according to RealtyTrac Inc., the Irvine, California-based seller of default data. Filings surpassed 300,000 for the third straight month in May, RealtyTrac said on June 11.Last Updated: June 23, 2009 10:06 EDT