Home sales rise - while prices fall 17%
Sinking home prices and first-time tax credit draw in buyers.
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NEW YORK (CNNMoney.com) -- Existing home sales rose in May, as increasingly affordable home prices and a first-time tax credit attracted hesitant buyers.
The National Association of Realtors reported that existing home sales ticked up 2.4% last month to a seasonally adjusted annual rate of 4.77 million units compared to the downwardly-revised rate of 4.66 million in April.
The sales missed expert forecasts of 4.82 million annual units, according to a consensus estimate of analysts compiled by Briefing.com, and are off 3.6% from the 4.95 million-unit pace 12 months ago.
The median price of homes sold in May was just $173,000, a 16.8% year-over-year drop.
Low mortgage rates and affordable home prices helped draw in hesitant buyers, said Lawrence Yun, NAR chief economist, in a prepared statement.
Yun said another likely boost was the $8,000 tax credit, which the Obama administration made available for qualified first-time home buyers.
The slight sales increase helped reduced some of the supply of homes on the market. Total housing inventory fell 3.5% to 3.8 million existing homes for sale. That's a 9.6-month supply, down from a 10.1-month supply in April.
Appraisals: The sales increase "is less than expected because poor appraisals are stalling transactions," Yun added. "Some contracts are falling through from faulty valuations that keep buyers from getting a loan."
A report earlier this month showed the number of home sale contracts signed in April far exceeded forecasts. Pending home sales are a forward-looking indicator since many of the contracts take weeks or months to become completed deals.
Outlook: Home prices may now be affordable enough to draw in more buyers, but "the real test for this theory will come next month," said Bob Walters, chief economist at Quicken Loans. "If the numbers remain strong, perhaps it is time to begin pondering if we have started to form a bottom in the housing market." 
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