Sales of existing homes rose 2.4 percent to a seasonally adjusted annual rate of 4.77 million units in May, but remained 3.6 percent below the 4.95 million-unit pace in May 2008, according to the National Association of Realtors (NAR).
The figures disappointed economists and traders, who were counting on stronger sales. Lawrence Yun, NAR chief economist, said the increase in sales is less than expected because poor appraisals are stalling transactions.
"Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting a loan," Yun said.
Analysts expressed concern that the appraisal problem could slow down the housing recovery and with it the economic recovery, with whole industries hoping for smaller housing inventories including construction, construction equipment and homebuilding industries.
Total housing inventory at the end of May fell 3.5 percent to 3.8 million existing homes available for sale, which represents a 9.6-month supply at the current sales pace, down from a 10.1-month supply in April.
NAR president Charles McMillan said freeing pent-up demand through extended tax credits for homebuyers will absorb inventory and stabilize home prices earlier.