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Pending home sales barely eked out a fourth consecutive month of growth in May, according to the National Association of REALTORS®. The number of buyers signing contracts for existing homes increased just 0.1 percent, which was down substantially from the 7.1-percent jump in April.

This came as a bit of a surprise because economists had been divided on whether pending home sales would remain unchanged, decrease 3 percent or increase 7 percent in May. Regionally, their diverse predictions weren’t far off, though. In the Northeast, pending home sales rose 3.1 percent, followed by the West with a 2.2-percent increase. They dropped 1.3 percent in the Midwest and 1.7 percent in the South.

May’s pending home sales were 4.6 percent higher than a year ago. This four-month recovery has been spurred on by falling home prices, foreclosures, government incentives to first-time buyers, and relatively low interest rates. But interest rates are on the rise, government incentives will expire in December, and home prices are beginning to show signs of stabilizing. Plus, the rise in unemployment is causing a growing number of low-risk borrowers to default on loans. All of these factors could keep home sales from returning to healthy levels for an extended period of time.

Some experts speculate about whether or not the market has hit a bottom in home prices and sales, but few see a chance of a recovery in the works. Pending home sales usually take up to two months to turn into finalized sales, so we should see continued strength in existing-home sales in the coming months.

The median existing-home price had its third-largest drop ever at 17 percent in May from April. This is most likely because 33 percent of existing homes under contract were foreclosures or other distressed properties. Foreclosures’ impact will have to be dealt with for the housing market to come out of this downturn.

By: Directinvestornews