Posted by Joseph Y. Calhoun, III

Update: Calculated Risk has some interesting charts on home sales. Take a look.

Existing home sales rose 2.4% in May from April. Sales were down 3.6% from May 2008. From the National Association of Realtors:

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®. May’s increase was the first back-to-back monthly gain since September 2005.

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.

Inventory fell:

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 supply² at the current sales pace, down from a 10.1-month supply in April.

So did the median price:

The national median existing-home price³ for all housing types was $173,000 in May, down 16.8 percent from a year earlier. Distressed properties, which declined to 33 percent of all sales in May from 45 percent in April, continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes.

The housing market is slowly healing with a lot of government aid. The median price fall doesn’t tell us much since the composition of sales is an important factor. With 1/3 of sales still in the distressed category a fall in the median isn’t surprising. Banks seem to be pricing houses to sell now and just trying to reduce their inventories of REO properties.

The housing market is slowly healing with lots of government aid. Inventory still needs to fall quite a bit to get to a “normal” market with 6 months of inventory, but at least its going in the right direction. My guess is that if we can get 6-9 months of sales at this pace, the inventory will be reduced to the point where sellers will have a little more leverage. If you’re looking to buy, I don’t think you can wait all that much longer. With the Fed standing on the monetary accelerator, inflation is coming somwhere down the pike and housing prices will be affected.