Sales of existing homes, including single-family, town homes, condos and co-ops, rose 2.4% in May to a seasonally adjusted annual rate of 4.77m units as the revised Home Valuation Code of Conduct took effect, altering the way homes are valuated. The sales rate is still 3.6% below the year-ago pace of 4.95m seen in May 2008, according to a monthly report released today by the National Association of Realtors (NAR). "Historically low mortgage interest rates clearly drew buyers into the market, and housing remains very affordable even with a recent uptick in rates," says Lawrence Yun, NAR's chief economist, in a statement today. "However, the increase in sales is less than expected because poor appraisals are stalling transactions." May 1 marked the effective date of a new Home Valuation Code of Conduct, which calls for the use of appraisal management companies (AMCs) to handle property valuations and mitigate the risk of fraud and bias in the appraisal process. One of HousingWire's sources, however -- an industry veteran with almost three decades of experience in the appraisal space -- says the use of AMCs, although achieving the intended distance between lenders and the appraisal process, has also wedged an unacceptable distance between the appraisal process and realistic valuations based on local performance. "We hear about appraisers from these AMCs driving from two and a half hours away to see a property," says the source. "They have no knowledge of the area or the history of prices in the community." NAR's Yun notes other instances where appraisers compare traditional homes with distressed and discounted sales and other faulty valuations that either interfere with price recovery or make obtaining a mortgage on a specific property impossible. "There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected," he says. NAR president Charles McMillan, a broker with Dallas-Fort Worth area Coldwell Banker Residential Brokerage, called for "realistic" appraisals conducted by specialists familiar with the local market. He also called for the expansion of the first-time home buyer tax credit to all buyers of primary homes, regardless of income, into 2010. Such an expansion of the tax credit, combined with reasonable appraisals, should make obtaining a mortgage and owning a home easier, in turn working even further through housing inventory. NAR found that housing inventory as of the end of May fell 3.5% to 3.8m existing homes, representing a 9.6-month supply at the current sales pace. The median existing-home price for all housing types came in at $173,000 in May, 16.8% below the median seen in the same time last year. Distressed -- or foreclosed -- sales put downward pressure on the median, although they accounted for 33% of all sales in May, down from 45% of all sales in April. Write to Diana Golobay.