New-Home Sales, Prices Decrease
As Builders Lose Confidence

New-home sales resumed falling in May and the big jump in demand the month before was revised lower, while the median price of a home compared to a year earlier dropped.

Sales of single-family homes decreased by 1.6% to a seasonally adjusted annual rate of 915,000, the Commerce Department said Tuesday. April new-home sales rose 13% to an annual rate to 930,000; originally, the government said April sales rose 16% to 981,000.

The median estimate of 25 economists surveyed by Dow Jones Newswires was a 6.2% decrease in May sales to a 920,000 annual rate. Year-to-year, new-home sales were 16% lower than the level in May 2006.

Builders are losing confidence. They broke ground in May at a lower rate than the month before; government data showed May housing starts fell 2.1%, the first drop in four months. The lifeless housing market has reduced economic growth for six consecutive quarters, and a bulging supply of unsold homes suggest further drag. Another thorn in the side of the industry is the subprime loan market mess. Lenders have tightened credit -- and might do so further amid evidence that the outlook for securities backed by the riskiest subprime loans made last year has deteriorated.

As for inventories, there were an estimated 536,000 homes for sale at the end of May, representing a 7.1 months' supply at the current sales rate. In April, an estimated 542,000 were for sale, an 7.0 months' inventory.

The median price of a new home fell 0.9% to $236,100 in May, down from $238,200 in May 2006. The average price increased 6.5% to $313,000 from $293,900 a year earlier. In April this year, the median price was $232,700 and the average was $299,600.

Regionally last month, new-home sales fell 11% in the Northeast, 1.9% in the West, and 7.3% in the South. Demand rose 31% in the Midwest.

An estimated 85,000 homes were actually sold in May, down from 87,000 in April, based on figures not seasonally adjusted.

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