By Denny Gulino and Ian McKendry

WASHINGTON (MNI) – Sales of existing single-family homes, town
homes, condominiums and cooperatives slipped 1.5% in May to a 4.55
million annual rate, slightly below expectations but still a sign
“housing has turned the corner,” the National Association of Realtors
reported Thursday.

NAR Chief Economist Lawrence Yun told reporters that the relatively
low inventory, a 6.6 months’ supply in May, and the sustained rate of
sales means “housing has certainly turned the corner” with now 11
consecutive months of “solid year-to-year gains.” He added, though, the
numbers would be even better if low-end buyers could get mortgage loans
more easily.

Yun cautioned as well that in some states where the foreclosure
process is bottled up in judicial reviews there could be a resurgence of
distressed sales coming that dampens the sales rate. Those states, in
particular, are Illinois, Ohio and Indiana in the Midwest and New York,
Connecticut and New Jersey in the Northeast.

The month’s supply of homes was slightly less in April than in May
and the spring as a whole “did not get the normal seasonal upswing” in
inventory, Yun said. Some homeowners, he said, may be holding on and
delaying sales to capture more of the upswing in prices.

Although there are four million homes in the “shadow inventory” of
foreclosed houses, “there used to be six million,” he said. The
investors who have been gobbling up distressed properties were not as
much in evidence in May, he said, another sign that low-end homes are
just not as available.

The credit blockage that keeps approved FICO scores excessively
high for first-time buyers, is also keeping small homebuilders from
getting building loans and so doing more to provide new units for sale,
he said. His comments seemed to reinforce the views of some Federal
Reserve policymakers who have noted the credit channel is not
transmitting monetary policy easing as efficiently as would be expected
in other circumstances.

“Only large builders can tap Wall Street funds,” he said. “The
small-time builders can’t obtain construction loans,” keeping newly
built units at a 50-year low.

The median national home price reached $182,600 in May, its highest
since June 2010 and 7.9% above a year earlier. “The last time there were
three back-to-back price increases from the same month a year earlier
was from March to May of 2006,” Yun said.

Yet individual homeowners aren’t “suddenly witnessing that kind of
price appreciation.” Instead, he continued, the national average is
influenced by increased sales of higher-priced homes, $250,000 and
above, and fewer sales of those prices $100,000 and less.

April sales nationally were unrevised, still at a 4.62 million
rate. May sales, slightly below expectations, were down in three of the
four geographic regions for the month, with the biggest decline in the
Northeast, dropping 4.8%. But compared to a year earlier, all four
regions were up and, in the Midwest, up substantially, by 19.5%.

Sales of single-family houses dropped 1.0% in May from April, and
condo sales were down 5.7%.

May’s so-called distressed sales were 25% of the total, which Yun
said is the lowest proportion since the NAR began tracking them in
October of 2008. Of that 25%, 15% were sales of foreclosed units and 10%
were short sales.

All-cash sales “inched lower” to be 28% of the total, “also
consistent with the decline of investors participation, now down to 17%
from 20% in April.

First-time buyers made up 34% of May’s sales total and, Yun said,
“they are not really stepping up.” In prior months that proportion was
slightly higher and normally is 40% to 45%. “They are being constrained
by excessively tight underwriting standards,” he said. Those who are
buying existing houses are “repeat buyers, who are trading up or trading
down.” Yun said 85% of homeowners still have some equity “and now are
beginning to make their moves.”

At the same time, if banks and Fannie Mae and Freddie Mac are
holding back retained inventory, hoping for better prices, “they are
making a mistake,” Yun said.

May’s modest decline in sales is attributable to a shortage of
inventory of lower priced units “rather than a lack of demand,” and was
not influenced by a stock market decline, which happened later, Yun
said.

A separate Realtor confidence survey, he said, shows “foot traffic”
is “much higher than what has been seen before. There is plenty of
buying activity but they are just unable to complete the deal.”

While “the housing market has clearly turned the corner month to
month there will always be some normal volatility,” Yun said. He added
another cautionary note, saying that “in the unlikely event of the
‘fiscal cliff,’ which would not only impact housing but a whole sector
of the economy,” this year’s housing sales could see an adverse impact.

** MNI Washington Bureau: 202-371-2121 **

[TOPICS: M$$AG$,M$U$$$,MAUDS$]