Sales of existing-home sales increased in May with buyers responding to lower home prices, NAR says.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – increased 2.0 percent to a seasonally adjusted annual rate of 4.99 million units in May from a level of 4.89 million in April, but are 15.9 percent below the 5.93 million-unit pace in May 2007.
NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said buyers are seeing value in the current housing market. “Home buyers are starting to get off the fence and into the market, drawn by drops in home prices in many areas and armed with greater access to affordable mortgages,” he said. “Today’s buyer plans to stay in a home for 10 years, which is a good strategy for building long-term wealth.”

The national median existing-home price for all housing types was $208,600 in May, down 6.3 percent from a year ago when the median was $222,700.

Lawrence Yun, NAR chief economist, said there’s still a lot of inventory in the market. “The large supply of homes on the market clearly favors buyers, and it should take several months to draw the inventory down,” he said. “Stabilization in home prices can only occur with buyers returning to the market, so we are encouraged by rising home sales, particularly in distressed markets. Foreclosures and short sales appear to be a larger part of the market, particularly in California, and are creating a drag on current home prices.”

Total housing inventory at the end of May fell 1.4 percent to 4.49 million existing homes available for sale, which represents a 10.8-month supply3 at the current sales pace, down from a 11.2-month supply in April.

Although conditions remain mixed around the country, unpublished snapshot data shows a number of areas are experiencing much higher sales activity than May 2007, including Sacramento, the San Fernando Valley and Monterey County in California; Sarasota, Fla.; and Battle Creek, Mich.

“Keep in mind that the volume of home sales is the primary driver of economic activity that is tied to housing,” Yun said. “It’d be premature to say the improvement marks a turnaround. The market is fragile, so a first-time home buyer tax credit and a permanent raise in loan limits would be important steps to get the housing engine humming.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 6.04 percent in May from 5.92 percent in April; the rate was 6.26 percent in May 2007.

Single-family home sales rose 1.6 percent to a seasonally adjusted annual rate of 4.41 million in May from 4.34 million in April, but are 14.5 percent below the 5.16 million-unit pace in May 2007. The median existing single-family home price was $206,700 in May, which is 6.8 percent below a year ago.

Existing condominium and co-op sales increased 5.5 percent to a seasonally adjusted annual rate of 580,000 units in May from 550,000 in April, but are 24.6 percent lower than the 769,000-unit level a year ago. The median existing condo price4 was $223,400 in May, down 2.1 percent from May 2007.

Regionally, existing-home sales in the Midwest rose 5.5 percent in May to a pace of 1.16 million but are 16.5 percent lower than a year ago. The median price in the Midwest was $165,300, which is 0.7 percent below May 2007.

In the Northeast, existing-home sales rose 4.6 percent to an annual rate of 910,000 in May, but are 15.0 percent below May 2007. The median price in the Northeast was $278,000, down 2.4 percent from a year ago.

Existing-home sales in the West increased 2.0 percent to an annual pace of 1.02 million in May, but are 12.8 percent below a year ago. The median price in the West was $286,600, which is 16.0 percent lower than May 2007.

In the South, existing-home sales slipped 0.5 percent to an annual rate of 1.91 million in May, and are 17.0 percent below May 2007. The median price in the South was $175,000, down 4.3 percent from May 2007.

Source: NAR

For the first time ever, Central Florida governments couldn’t sell tax certificates at auction.

The problem surprised government officials and negatively impacts local governments’ tax coffers, as well as the homeowners who are delinquent paying their taxes.

The tax certificates represent delinquent property taxes, and local governments get immediate tax income when they sell certificates to investors. In exchange, the investors get the money, once it’s paid, along with interest, which can range from 5 percent to 18 percent. In a tax certificate auction, investors bid an interest rate that they’re willing to charge a homeowner, and the lowest interest rate wins.

As a result of the tax certificate bust, a number of people are hurt – local governments must now adjust budgets based on money they will not immediately receive, and homeowners in tax arrears must now pay the maximum 18 percent interest penalty. Central Florida cities, counties and schools expect to take an immediate loss of about $20 million based on about 15,000 tax certificates that failed to sell.

“I would have thought that most everything would have sold,” says Lake County Tax Collector Bob McKee. “I would have never suspected that this would have happened.”

In earlier years, bidders offered an interest rate of about 5 percent to win the bid, so delinquent homeowners then owed their back taxes plus a 5 percent interest penalty per year. But homeowners with a tax certificate that did not sell at auction must pay 18 percent interest rate to the government per year. Since many of the delinquent homeowners already have financial problems and could face foreclosure, the 18 percent interest represents another financial hurdle.

In addition, many owners are “upside down,” owing more for a house than it’s worth in the market, and it’s unclear how many of these homeowners will just walk away. That represents an additional financial risk, and investors may not consider the potential return on their investment worth that amount of risk.

In Central Florida, the number of tax certificates increased 24 percent since 2007, with 110,000-plus property owners owing more than $320 million.