Condo, Co-op Sales Are Up 6.1%; Could Signal an Upward Trend

By Anuradha Kher, Online News EditorWashington, D.C.–Sales of existing homes showed another gain in May, benefiting from favorable affordability conditions and a first-time buyer tax credit, according to the National Association of Realtors (NAR). May’s increase was the first back-to-back monthly gain since September 2005.Existing condominium and co-op sales increased 6.1 percent to a seasonally adjusted annual rate of 520,000 units in May from 490,000 in April, but are 8.9 percent below the 571,000-unit level in May 2008. The median existing condo price was $173,800 in May, down 21.9 percent from a year earlier.“From the sales point of view, things seem to be stabilizing,” Jed Smith, managing director of quantitative research, tells MHN. “While sales activity is relatively flat, it is slowly inching upward toward the 5 million-a-year mark we predicted. Even though we see an increase in prices from month to month, we are not able to say that prices have recovered.”Lawrence Yun, NAR chief economist, expected an improvement. “Historically low mortgage interest rates clearly drew buyers into the market, and housing remains very affordable even with a recent uptick in rates,” he says. “First-time buyers also are being drawn off the sidelines by the $8,000 tax credit, which is helping to absorb inventory. However, the increase in sales is less than expected because poor appraisals are stalling transactions. Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting a loan.” Overall existing-home sales—including single-family, townhomes, condominiums and co-ops—rose 2.4 percent to a seasonally adjusted annual rate1 of 4.77 million units in May from a downwardly revised level of 4.66 million units in April, but remained 3.6 percent below the 4.95 million-unit pace in May 2008. “33 percent of all properties sold in May were distressed sales, as compared to as high as 49 percent a few months earlier, ” says Smith. According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage edged up to 4.86 percent in May from a record low 4.81 percent in April; the rate was 6.04 percent in May 2008. Last week, Freddie Mac reported the 30-year fixed at 5.38 percent; data collection began in 1971. Total housing inventory at the end of May fell 3.5 percent to 3.80 million existing 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. Smith says the appraisal problem is serious. “Lenders are using appraisers who may not be familiar with a neighborhood, or who compare traditional homes with distressed and discounted sales. Stories of appraisal problems have been snowballing from across the country with many contracts falling through at the last moment. There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected.”