Sales fell 15 percent in May from the year earlier to a seasonally adjusted annual rate of 4.81 million. Inventory increased to a 9.3-month supply. The sales pace is in the bottom 10% of readings in the 12 years of data. (Please see the chart below. Click to enlarge.)

Actual existing homes inventory fell one percent to 3.72 million units the National Association of Realtors (NAR) reported today. The excess is equal to 770,000 units although total inventory has fallen 841,000 units from the peak in July 2007. The 9.3 months supply compares to an average of 6.5 months.

Prices fell 4.6% in the last year with the national median price now at $166,500. Distressed sales are 31% of the total. Thirty percent of buyers pay all cash versus the normal all-cash rate of 10%. Investors are 19% of buyers.

Lawrence Yun, chief economist at NAR, blamed the slow sales pace on tight lending standards.

“Actually standards are fairly reasonable for qualified buyers,” said Bill McBride at Calculated Risk. “Of course many qualified buyers bought last year – using the ill-considered homebuyer tax credit – and that pulled demand forward. The housing market is still paying the price for that policy mistake.”