Fewer people bought previously occupied homes in May, lowering sales to their weakest point of the year.
Home sales sank 3.8 percent last month to a seasonally adjusted annual rate of 4.81 million homes, the National Association of Realtors said Tuesday. That's far below the roughly 6 million annual sales rate typical in healthy markets.
Since the housing boom went bust in 2006, sales have fallen in four of the past five years. Analysts say they expect sales to level off at about 5 million a year. That's not much better than the 4.91 million homes sold last year, the worst showing in 13 years.
In Western New York, the Buffalo Niagara Association of Realtors won't release May sales figures until early July. But in April, home sales fell 15 percent from a year ago to 610, although they were up 25 percent from 553 in March. Meanwhile, the median sales price in April fell 1 percent from a year ago but was up 8 percent from March, to $113,500.
Moreover, Buffalo's housing market has performed much better than many other areas of the country through the entire housing bust. Housing analyst Jonathan Smoke, executive director of research for Housing IntelligencePro, noted that Buffalo's resale activity remains at about 95 percent of the level in 2006, with average prices per square foot having fallen by only 1 percent.
Nationwide, the depressed housing market has weighed on the broader economy. Declining home prices have kept people from selling their houses and moving to find jobs in growing areas. They have also made people feel less wealthy. That has reduced consumer spending, which drives about 70 percent of economic activity.
One sign of the housing industry's struggles is that fewer first-time buyers are entering the market. The number of first-timers ticked down to 35 percent of sales last month. In healthy times, they drive about half of sales.
First-time buyers are critical because they tend to improve their properties and invest in their communities, a combination that raises home values. And their purchases allow sellers to move up to pricier homes.
Instead, the market has been saturated with foreclosures, which force prices down. Sales of homes at risk of foreclosure fell in May. But they still made up 31 percent of all purchases. And many pending foreclosures are backlogged in the courts or held up by state and federal probes into questionable practices by lenders.
Until the glut of foreclosures is cleared and people think it's a safe time to buy, "it is unlikely that home prices can recover on a sustained basis," said Steven Wood, chief economist at Insight Economics.
Bigger required down payments, tougher lending rules, heavy credit-card and student-loan debt and a shortage of desirable starter homes are keeping many would-be buyers away. Even some who do have enough money for a down payment and a solid credit history are holding off, worried that home prices will keep falling.
Investors are filling some of the void. They are spending cash to scoop up deeply discounted homes in hard-hit areas of Phoenix, Las Vegas and Tampa. Last month, investors accounted for 19 percent of all sales.
Sales fell across most regions in May. Sales dropped 6.4 percent in the Midwest, 5.1 percent in the South and 2.5 percent in the Northeast. There was no change in the West.
News Business Reporter Jonathan D. Epstein contributed to this report.