The National Association of Realtors reported that existing home sales inched up 2.4 percent in May to a seasonally adjusted annual rate of 4.77 million units up from downwardly-revised rate of 4.66 million in the previous month. This is the third monthly increase this year.

The median price of homes sold in May was $173,000, 16.8 percent lower same month last year’s figure.

According to Lawrence Yun, NAR’s chief economist, the sales increase "is less than expected because poor appraisals are stalling transactions," Yun added. "Some contracts are falling through from faulty valuations that keep buyers from getting a loan."

With home sellers still competing against a rising number of bargain-priced foreclosures, and new rules for property appraisers are delaying or scuttling many deals. Nonetheless, low mortgage rates and affordable home prices helped draw in hesitant buyers and the $8,000 tax credit, which the Obama administration made available for qualified first-time home buyers, can boost sales.

The sales increase helped reduced the inventory of homes for sales. Total supply of previously owned homes fell 3.5 percent to 3.8 million existing homes for sale. That is 9.6-month supply at the current sales pace down from a 10.1-month supply in April. The normal market would have only about 6 months supply.

The inventory figures, however, don't reflect the large number of houses being held off the market by owners who are reluctant to sell while prices are falling.

Interest rates, for example, have climbed back from their all-time lows this spring. The average rate on a 30-year, fixed-rate mortgage was 5.38 percent last week, according to Freddie Mac.