Tuesday, June 27, 2006

Sales of New Homes Increase Up 4.6 % Unexpectedly in May

U.S. Sales of new homes rose in May 2006 to the fastest pace this year, led by big gains in the South.

The U.S. Commerce Department Commerce Department reported Monday that sales of new single-family homes increased by 4.6 % last month to a seasonally adjusted annual rate of 1.234 million units. Wall Street had been expecting a 4 % drop in sales.

The median price of a new home did drop to $235,000 in May, down 4.3 % from the April sales price. The May level was up 3.1 % from a median price of $229,200 in May 2005.

Analysts pointed to the slowdown in price gains, the reduction in earnings forecasts by some of the nationā€˜s biggest builders and the high level of unsold homes as evidence the housing market is slowing.

Many economists are looking for sales of both new and existing homes to fall by around 10 percent this year as rising mortgage rates crimp demand. The lowest mortgage rates in four decades helped to propel sales to five straight annual records from 2001 through 2005.

For May, sales posted the largest increase in the South, a gain of 6 % which pushed the annual sales rate up to 669,000 units.

The only region to suffer a decline was the Northeast, where sales fell by 7.9 % to an annual rate of 58,000 units.

Economists believe that the huge backlog of unsold homes will put more downward pressure on prices in coming months.


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