Sales of previously occupied homes rose modestly from April to May, the third monthly increase this year, but signs of a housing recovery are fragile at best.
The National Association of Realtors said Tuesday that home sales rose 2.4 percent last month to a seasonally adjusted annual rate of 4.77 million, from a downwardly revised pace of 4.66 million in April.
About one out of every three homes sold was a foreclosure or distressed sale. That helped drag down the median price to $173,000 — 16.8 percent below a year ago. Falling prices coupled with new rules for property appraisers have caused many transactions to fall apart or be delayed.
"We have just been flooded with e-mails, telephone calls on the appraisal problems," said Lawrence Yun, the Realtors' chief economist.
The sales results missed economists' expectations, and stock markets headed lower on the news. Home sales had been expected to rise to an annual pace of 4.81 million units, according to Thomson Reuters.
One bright spot, however, was that the number of unsold homes on the market at the end of May fell 3.5 percent to nearly 3.8 million. That's a 9.6 month supply at the current sales pace.
That drop was "the best news in the report," said Joseph LaVorgna, Deutsche Bank's chief economist.