Posted by Cassie Nist - email
NEW YORK (CNNMoney.com) -- Home sales continued their modest upward swing in May, according to a closely watched industry report that rose for the fourth straight month for the first time in nearly 5 years.
The Pending Home Sales Index, reported Wednesday by the National Association of Realtors (NAR), rose 0.1% during the month. The index was up 6.7% compared with May 2008. It was the first four-month runup in the pending sales measure since October 2004
Industry prognosticators had forecast no growth at all in the index for the month, according to Briefing.com, expecting it to settle back after ramping up 6.7% in April.
But the rise in sales contracts may not yield a like increase in completed sales, according to Lawrence Yun, chief economist for NAR.
"Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions," he said.
Many industry insiders have complained that home appraisals are being too often based on values of foreclosed properties, which sell for significantly less than the homes of ordinary sellers.
The banks that have repossessed the foreclosed homes are anxious to sell and accept offers at large discounts than comparable homes not in foreclosure.
"We see that distressed homes often are selling for 20% less than normal homes in the same area, but some appraisals don't distinguish between traditional homes and distressed property," said NAR President Charles McMillan, a broker in Dallas-Fort Worth.
Overall, home sales are still slow, about a third below the peak years of 2005 and 2006, despite huge drops in home prices.
NAR's Housing Affordability Index remains near historic highs, although it declined in May to 171.6 from 178.8 a month earlier. That was the high point for the index, which dates back to 1970.