NEW YORK ( TheStreet) -- Existing-home sales were down in May by more than 2%, defying the expectation of most economists who predicted a rise to a level above 6 million units. The just-under 5.7 million units of existing homes sold in May was well below the consensus estimate of close to 6.2 million. The April figure for existing home sales was upwardly revised to 5.8 million units. The April sales gain was 8%.

Lawrence Yun, National Association of Realtors (NAR) chief economist, said even amid a down month in May, the year over year increase in home sales was a positive, and there will be lingering elevated home sales data as a result of short-term market delays. "We are witnessing the ongoing effects of the home buyer tax credit, which we'll also see in June real estate closings." Yun said that difficulty in securing mortgages for short sales have caused delays, and those delays may show up in the June numbers also.

"In addition, many potential sales are being delayed by an interruption in the National Flood Insurance Program. Florida and Louisiana, also impacted by the oil spill, have the highest percentage of homes that require flood insurance," Yun said.

Even if short-term delays may lead to lumpiness in the home sales data, it isn't expected to be apparent as a positive in the other big piece of U.S. housing market data, due out Wednesday.

On Wednesday, new home sales data for May will be released, and that report is not expected to be a particularly good one, given the end of the federal homebuyer tax credit.

The Wednesday new home sales data may be the worst in 47 years, according to Stifel Nicolaus, which is predicting a drop of 41% month over month, though its estimate is 30% below the consensus. The consensus is 423,000 units, with Stifel Nicolaus at 295,000 units sold.

Pending home sales are expected to decline notable in May and June also, the NAR said.

Historically, the homebuilders stocks have been owned primarily by institutions, but with the extreme volatility in the shares over the past two years, the homebuilder stocks have turned into a trading proxy for the U.S. economic recovery.


Still, valuations of the homebuilder stocks are low points. Many of the homebuilder stocks are near 52-week lows and most of the group trading near or below adjusted book value.

Two big homebuilder earnings reports on due out on Thursday and Friday too, from Lennar ( LEN - Get Report) and KB Home ( LBH),giving investors another reason to remain on the sidelines with homebuilders stocks and the sometimes surprising data reports.

Some of the more active homebuilder stocks in recent trading have been Standard Pacific ( SPF), M.D.C. Holdings ( MDC - Get Report), PulteGroup ( PHM - Get Report) and D.R. Horton ( DHI - Get Report).

Stocks of the homebuilders were not noticeably lower in the immediate wake of the existing home sales report.

-- Reported by Eric Rosenbaum in New York.

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