Sales of existing homes continued to drop in May, but falling mortgage rates helped limit the decrease, a real estate trade group said this week.
The National Association of Realtors said resales of single-family homes totaled a seasonally adjusted annual rate of 3.29 million, down 1.2 percent from April's rate of 3.33 million. Sales in April dropped 2.1 percent.
Existing home sales have dropped each month since the first of the year, except during March when they were unchanged. They totaled 3.44 million in 1989.
Mortgage rates, on the other hand, have generally declined since hitting double-digit figures in January. They dropped from 10.67 percent at the beginning of May to 10.33 percent at month's end, according to surveys by the Federal Home Loan Mortgage Corp. Rates slipped to 10.16 percent in the last week.
Mortgage rates also have crimped sales of new homes, which dropped 1.6 percent in April, the fifth straight monthly decline. April's seasonally adjusted annual rate of 546,000 was the lowest level of sales since the recession year of 1982.
New home sales in May are expected to post an increase when sales figures are announced by the Commerce Department, but "growth is certain to be held back by May's unusually rainy, chilly weather," said Samuel D. Kahan, chief economist with Fuji Securities Inc.
"Nevertheless, home sales may stabilize around their year-to-date pace in coming months, as the market begins to digest the decline in mortgage lending rates," he wrote in the government securities dealer's current issue of Perspectives.
John A. Tuccillo, chief economist for the Realtors group, has said mortgage rates will continue drifting downward through the summer, although no sharp drops are expected.
Norman A. Flynn, the group's president, said the credit crunch found in some sectors of the real estate industry mainly affects builders rather than home buyers.
The Realtors said the median price of an existing home in May was $94,800, down from $95,600 the previous month. The median price of a new home in April was $135,900, according to the Commerce Department.
Existing home sales rose 1.7 percent to an annual rate of 590,000 in the West, where the median price was $135,300. Sales inched up 0.8 percent to 1.31 million units in the South, which posted an $85,200 median price.
Sales in the recently sluggish Northeast were unchanged at 520,000 although the median price was $141,300, up from $140,700 the previous month. Sales had peaked at 610,000 units in October.
"Overall, the Northeast market appears to be stabilizing," Tuccillo said.
In the Midwest, where the median price was $73,100, sales of existing homes fell 4.4 percent to 880,000 units.