WASHINGTON (MNI) - The National Association of Realtors' existing home sales report Tuesday is expected to show continued softening in the housing market, mainly driven by persistent weakness in the labor market and home buyers that remain wary of falling home prices.
Existing home sales figures for May, which the NAR will publish at 10:00 am ET, are expected to fall to 4.80 million according to a survey of economists by Market News International. Sales figures for April came in at 5.05 million.
Tuesday's existing home sales release will be of particular importance because May is traditionally one of the most biggest months of the year for home sales and if potential buyers decide not to buy in the spring they will often wait till next year.
The release of existing home sales data is usually preceded by data on pending home sales -- which declined by 11.6% in April, indicating home resales for May will be weak.
"We continue to see that home prices will continue to fall through the end of the year and then we will get some extremely modest upward momentum in the early part of 2012," Anika Khan, economist at Wells Fargo told Market News International.
"We need foreclosures to subside to get that downward pressure on home prices to kind of quell," Khan added.
Part of the problem with foreclosures is that there are still many home owners living in their homes but not making mortgage payments because their home is now worth less than the loan take to buy the house, often referred to as negative equity.
According to a June report by data analytics firm, CoreLogic, 22.7% of all residential properties with a mortgage had negative equity.
Banks are also now more hesitant to foreclose on properties for a number of reasons; one of which is an investigation by the State attorney generals into the banks' foreclosure practices. Some sort of settlement is expected, but the timeline of an agreement is not yet known.
Wells Fargo's Khan said it would be better if a deal between banks and the attorney generals got done sooner rather than later because that would speed up the process of working through the foreclosure backlog.
Another problem the NAR noted in last month's report is that appraisers continue to be very conservative, meaning sales that looked to be certainties fell through because of low appraisal values.
Khan concurred, saying "appraisal problem is clearly still an issue, you know appraisers are extremely conservative at this particular point of the housing market cycle and they will continue to be."
According to the S&P/Case Shiller house price indices, home prices fell 4.2% in the first quarter of 2011 after falling 3.6% in the fourth quarter of 2011.
"This month's report is marked by the confirmation of a double-dip in home prices across much of the nation," Chairman of the Index, David Blitzer said in the report released May 31.
"The rebound in prices seen in 2009 and 2010 was largely due to the first-time home buyers tax credit. Excluding the results of that policy, there has been no recovery or even stabilization in home prices during or after the recent recession," Blitzer said.
Khan said the future progress of the housing recovery boils down to jobs. Unfortunately recent data shows that the labor market remains weak.
Weekly jobless claims continue to tread above 400,000 after trending below that level in February and March, and the May employment report published by the Bureau of Labor Statistics showed only 54,000 new jobs were added in May, below even the most bearish of forecasts.
** Market News International Washington Bureau: (202) 371-2121 **