The National Association of Realtors can always be depended upon to put the best face on housing news.

The monthly report on the sales of existing homes for May released on Monday was headlined "Homes Sales Show Market is Under Performing" and the opening paragraph read "Existing-home sales were essentially unchanged in May."

Well, that is true. Total existing home sales including single-family homes, town homes, condos, and co-ops were down only slightly - 0.3 percent - to a seasonally adjusted annual rate of 5.99 million units in May from an upwardly revised 6.01 in April. However, this figure is more than 10 percent below the 6.68 million homes sold in the same month one year ago which was around the time that NAR proclaimed that the market was "flattening out."

Single family home sales were off less than one percent from April levels but were 10.8 percent lower than the 5.83 million units sold one year ago and while existing condo and co-op sales actually rose 2.6 percent to a seasonally adjusted annual rate of 790,000 units in May this was still a 6.7 percent drop from the sales pace one year ago.

In other words, we seem to have not yet reached that much anticipated "bottom."

Housing inventory continues to increase. At the end of May there were 4.43 million existing homes available for sale. At current absorption rates this represents an 8.9 month supply. In April the inventory had an 8.4 month backlog and in March there was an estimated 7.4 months supply.

According to Pat V. Combs, current NAR president, the higher inventories are actually helpful in that they are helping to offset an affordability impact from higher mortgage interest rates. "Although mortgage interest rates are trending up, they are historically favorable," she said. "The good news is buyers have more negotiating power with a fairly large supply of homes available in much of the country. Buyers who've been on the sidelines may want to take a closer look at current conditions in their area - if they wait for sales to rise, their choices and negotiating position won't be as good as they are now."

Prices, however, appear to be pretty much holding their own. The median price for all housing types in May was $223,700 which is a 2.1 percent dip from the median price of $228,500 one year earlier. In addition, NAR states, this represents a temporary downward distortion in prices on a national basis because many high cost areas are in a sales slump.

Lawrence Yun, NAR senior economist, commented on the market's softness: "I think psychological factors are currently the biggest drag on the housing market, in addition to a disruption from tighter credit for subprime borrowers. Household formation has slowed dramatically since late 2006, implying that many people are doubling-up - they're adding roommates or moving in with parents."

"The market is underperforming when you consider positive fundamentals such as the strength in job creation, economic growth, favorable mortgage interest rates and flat home prices. It appears some buyers are simply waiting for more signs of stability before they get serious about getting into the market."

New home sales were also down. May sales were at a seasonally adjusted annual rate of 915,000 homes according to a joint report issued Tuesday by the Department of Housing and Urban Development and the U.S. Census Bureau. This represents a decline of 1.6 percent from figures for April and is a drop of 15.8 percent from May 2006 data.

Median and average sales prices for new homes sold in May were down from 2006 levels at $236,100 and $313,000 respectively. One year ago the numbers were $246,500 and $305,900. In the case of new homes, prices do not reflect other concessions that may have been made by the builder to encourage sales such as upgraded appliances or landscaping, financing, or paying closing costs.

The inventory of new homes available at the end of May was 536,000. This represents a supply of 7.1 months at the current pace of sales. Last month the inventory was 7 months and one year ago it was 6.2 months. Median marketing time is 5.7 months after construction is completed compared to 5.9 months for homes sold in April and 4.3 months for homes sold in May 2006.