Sales of previously owned homes fell unexpectedly in May as delays in processing mortgage applications hampered the closing of contracts benefiting from a popular homebuyer tax credit, an industry group said on Tuesday.
The National Association of Realtors said sales fell 2.2 percent month over month to an annual rate of 5.66 million units from an upwardly revised 5.79 million-unit pace in April.
Analysts polled by Reuters expected May sales to rise 5.5 percent to a 6.12 million-unit pace from the previously reported 5.77 million units in April. Sales were up 19.2 percent compared to May last year.
Sales were expected to rise as transactions for existing homes are measured at contract closing.
Although the tax credit for home buyers expired in April, qualified home owners have until June 30 to close contracts.
"There hasn't been much of a rebound in housing. We are growing from the extremely low levels of last year. On average, we are looking for a moderate advancing trend," said Stephen Stanley, chief Economist at Pierpont Securities in Stamford, Conn.
U.S. stock indexes pared gains on the report, Treasury debt prices rose. The U.S. dollar was up slightly against the euro.
The Senate last week voted to extend the deadline for closing contracts to Sept. 30.
The Realtors group said about 180,000 home buyers who had signed contracts to take advantage of the tax credit were likely to miss the June 30 deadline for closing because of delays in mortgage processing.
Government incentives and near record low mortgage rates have helped the housing market dig out of a three-year slump.
With the end of tax credit, a temporary bout of weakness is expected, before sales pick up again as the labor market and broader economy gradual improve.
The housing market, whose collapse dragged the economy into its longest and deepest recession since the 1930s, still faces major challenges from foreclosed properties, which are keeping the supply of houses elevated and prices depressed.
The report came as the Federal Reserve's policy-setting committee prepared to start a two-day meeting, where it is expected to extend its pledge to hold overnight interest rates exceptionally low for "an extended period" to aid the recovery.
The U.S. central bank is not seen lifting rates, currently near zero, until next year.
Foreclosed properties and short sales accounted for 31 percent of transactions last month, the Realtors group said, with first-time buyers representing 46 percent.
Despite the weak sales, the supply of previously owned homes on the market fell 3.4 percent to 3.89 million units. At May's sales pace, that represented a supply of 8.3 months, compared with April's 8.4 months.
The national median home price rose 2.7 percent from May last year to $179,600, the highest level since July.
The decline in sales last month was broad-based, with sales of single-family dwellings sliding 1.6 percent. Condominiums and co-ops dropped 6.8 percent.
© 2015 Thomson/Reuters. All rights reserved.