New-Home Sales Decline in May, Holding Above First Quarter Average

Sales of newly built, single-family homes declined 2.1 percent to a seasonally adjusted annual rate of 319,000 units in May, according to figures released by the U.S. Commerce Department today. The decline only partially offsets a larger gain that was registered in April.

"Today's report indicates that new-home sales are holding fairly steady at a relatively low rate, with both April and May sales numbers running above the first-quarter average," noted Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. "In view of the slow progress of economic recovery and the challenges builders continue to face with regard to rising materials prices, access to construction credit, competition from foreclosed homes and inaccurate appraisals, the averages for the last two months combined represent some very slow improvement which should continue as expected economic gains boost consumer confidence."

"One bright spot in the government's May housing numbers is the inventory of new homes for sale, which continued to fall to a new record low last month," said NAHB Chief Economist David Crowe. "This means that builders continue to be appropriately cautious about adding new homes to the marketplace, and it has pushed down the months' supply to a level typically found in stable markets."

The largest decline in new-home sales this May occurred in the Northeast, which recorded a 26.7 percent slide. The West posted a more modest, 3.5 percent decline, while the Midwest posted no change from the previous month and the South posted a 2.4 percent gain.

Meanwhile, despite the slower sales pace, the inventory of new homes for sale continued downward in May, declining 3.5 percent to 166,000 units. This marks the lowest inventory number on record and represents a 6.2-month supply at the current sales pace.

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