Severe weather, a spike in gas prices and tight credit contributed to a 3.8 percent drop in existing home sales from April to May, the National Association of Realtors reported today. Year-over-year home sales are down 15.3 percent.
Prices are down, as well. The median home price for existing homes, which includes townhomes, condominiums, co-ops and single-family homes, was $166,500, a drop of 4.6 percent from May 2010.
Distressed homes, which typically sell at a discount of about 20 percent, made up a lower percentage of the sales. They accounted for 31 percent in May, down from 37 percent in April.
All-cash transactions accounted for 30 percent of the sales in May, down from 31 percent in April. Most all-cash purchases are made by investors.
Flooding and severe storms were blamed for the particularly large decline in sales in the Midwest. The region saw a 6.4 percent drop in sales from April to May, and a year-over-year decline of 22.7 percent. The median home price was $136,400, a decrease of 8.5 percent from May 2010. Areas with improving job markers, such as North Dakota, Alaska, Washington, D.C. and many parts of Texas, are seeing stable or improving job markets.
“Overly restrictive lending standards are also constraining sales,” said Lawrence Yun, chief economist for the realtors’ group. “There’s been a pendulum swing from very loose standards which led to the housing boom to unnecessarily restrictive practices as an overreaction to the housing correction – the overreaction is clearly holding back the recovery.”
A proposal to require a minimum down payment of 20 percent would further jeopardize the housing recovery, according to Ron Phipps, NAR president. “We don’t need to throw the baby out with the bath water – increasing down payment requirements would effectively shut many qualified families out of the market,” Phipps said. “What we critically need is a return to the basics of providing safe mortgages to creditworthy buyers willing to stay well within their budget.”