Sales of existing homes saw their first back-to-back increase in nearly four years last month, but while the percentage gain in May was encouraging, the actual level of sales was lower than expected due to downward revisions.

The pace of all existing home sales rose 2.4% in May to 4.77 million, up from the April pace of 4.66 million. Compared to May 2008, the sales pace has fallen by 3.6%.

The National Association of Realtors said demand is up due to falling house prices, the first-time buyer tax credit, and low mortgage rates ― the average 30-year rate was 4.86% in May.

However, Lawrence Yun, chief economist at the NAR, said sales were less than anticipated because poor appraisals are delaying transactions. “Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting a loan,” he said.

Yun added: “In the past month, stories of appraisal problems have been snowballing from across the country with many contracts falling through at the last moment. There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected.”

NAR President Charles McMillan also said shoddy appraisals were hurting the market. “To maximize the potential for a housing recovery and subsequent economic recovery, we need realistic appraisals that are based on proper comparisons and done by a local specialist,” he said. 

The report also said that at the current sales pace, there is a 9.6-months’ supply of inventory on the market, compared to 10.2-months in the previous report and 10.9-months in March.

Deutsche Bank’s chief U.S. economist Joseph LaVorgna said the decline in overhang is the best news of the report. But looking at prices, which have been pushed down 16.8% since last year, LaVorgna said he expects “the ultimate peak to trough decline to reach 40%, which means that we are roughly two-thirds through the correction in home prices.”

In May, the median price for a home was $173,000, though that figure is distorted downwards a third of sales were foreclosure-related.