New U.S. home sales fell slightly last month, in another sign that the housing market’s recovery is likely to be gradual and prolonged.
The Commerce Department said Wednesday that sales dropped 0.6 percent in May to a seasonally adjusted annual rate of 342,000, from a downwardly revised April rate of 344,000. Sales were down nearly 33 percent from May last year.
The results fell far short of economists’ forecast of a 360,000 sales pace, according to Thomson Reuters. However, many analysts think new home sales hit bottom in January and will increase gradually as the economy gathers steam.
The median sales price of $221,600 was up 4.2 percent from April, but down 3.4 percent from a year ago.
Still, houses are still sitting on the market unsold for months. There were 292,000 new homes for sale at the end of May, down more than 2 percent from April. At this sluggish rate of sales, that’s a 10-month supply.
The inventory of homes for sale “will remain enormous, particularly with increased competition coming from distressed sales of existing homes,” wrote Joshua Shapiro, chief economist with MFR Inc.
Fallout from the housing crisis has played a central role in the U.S. recession, now the longest since World War II. Foreclosures have spiked, homebuilders have slashed construction, and financial companies have racked up multibillion-dollar losses.
