US home sales fall to 2011 low

Fewer Americans purchased 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. Economists say that’s far below the 6 million homes per year sold in healthy housing markets.

Since the housing boom went bust in 2006, sales have fallen in four of the past five years. Analysts said they expect sales to level off at about 5 million per year. That’s not much better than the 4.91 million homes sold last year, the worst showing in 13 years.

The depressed U.S. 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 70 percent of economic activity.

The housing market has struggled because fewer first-time buyers are entering the market. The number of first-timers ticked down to 35 percent of sales last month. Typically, they drive half of sales in healthy markets. First-time buyers are critical because they 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 a large number of pending foreclosures are backlogged in the courts or held up by state and federal probes into troubled foreclosure practices by lenders. Until the glut of foreclosures are cleared and people think it’s a safe time to buy a house, “it is unlikely that home prices can recover on a sustained basis,” said Steven Wood, chief economist at Insight Economics.