Sales of existing homes rose 2.4% in May, the National Association of Realtors reported Tuesday, but prices continued to slip, with the national median down 16.8% from last May to $173,000.

The rise, which put existing home sales at a seasonally adjusted annual rate of 4.77 million units, fell short of the Wall Street consensus estimate of 4.82 million. The comparison came against a downward revision in April sales from 4.68 million to 4.66 million. Sales were down 3.6% from May, 2008.

The 2.4% increase was inflated by a 6.1% jump in condo sales, which were at a pace of 520,000 in May, fueled by fire-sale prices. The median condo price was $173,800 in May, down 21.9% from a year earlier. Single-family sales were up only 1.9% to a rate of 4.25 million in May, 3% below May 2008. The median existing single-family home price was $172,900, down 16.1% from a year ago.

Foreclosures and short sales continued driving the market down. Distressed properties accounted for 33% of all sales in May, down from 45% in April. First-time buyers represented 29% of sales.

Further evidence of the impact of sales of existing homes financed with junk mortgages came via a separate report from the Federal Housing Finance Agency, which said Tuesday that U.S. home prices fell only 0.1%, seasonally-adjusted, from March to April, according to its monthly House Price Index. For the 12 months ending in April, U.S. prices fell 6.8%, far less than the 15.4% drop reported by the Realtors for April. FHFA collects data only on homes financed by FHA conforming loans, which require substantial downpayments and clean credit records.

The Realtors also cited problems with the new Home Valuation Code of Conduct, which the group said is preventing some contracts from turning into sales. "The increase in sales is less than expected because poor appraisals are stalling transactions," said Lawrence Yun, NAR's chief economist."Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting a loan."

"Lenders are using appraisers who may not be familiar with a neighborhood, or who compare traditional homes with distressed and discounted sales," he said. "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."

A brighter spot in the NAR data was inventory, which declined 3.5% to 3.8 million units, a 9.6-month supply, down from 10.1 months in April. The NAR also said the number of people looking at existing homes for sale had increased 10 percentage points from last May.

The Realtors, normally a sunny lot, also pointed out that they believe the decline in distressed sales indicates that repeat buyers are moving back into the marketplace. "First-time buyers are concentrated in the lower price ranges, which include most of the distressed sales," explained Yun. "This is the time of year when we see large increases in the number of repeat buyers, who are benefiting from sales to entry-level buyers," Yun said. "Investors appear less active, but are more prevalent in areas with large price corrections."

Regionally, the Northeast rose 3.9% from April to a pace of 800,000 in May, 10.1% percent below a year ago, with the median price down 12.5% to $243,600. The Midwest rose 9.0% to a pace of 1.09 million, 4.4% below May 2008, with the median price down 10.4% to $145,800. The South was flat at a pace of 1.74 million in May, 8.9% below a year ago, at a median price 9.9% lower than last Mat at $157,400. The West was down 0.9% to a pace of 1.14 million, 11.8% higher than May 2008, and the median price plummeted 30.6% to $197,700.