New U.S. home sales dipped slightly last month, in another sign that the housing market recovery is likely to be gradual and prolonged.
The Commerce Department said that sales edged down 0.6% in May to a seasonally adjusted annual rate of 342,000, from a downwardly revised April rate of 344,000.
The results fell far short of economists’ forecast, but many analysts think new home sales hit bottom in January and will rise gradually as the economy gathers steam.
The median sales price last month rose 4.2% from April to $221,600, but that’s still 3.4% below year-ago levels.
Sales of previously occupied homes crept up 2.4% in May, the third monthly gain this year, the National Association of Realtors said Tuesday. There appears to be a strong consensus that existing home sales have hit bottom, but prices will continue to fall because rising unemployment is forcing more homeowners into foreclosure.
Government tax credits and spending have helped bring some homebuyers back into the market, but federal programs to stem foreclosures have yet to make a dent.
“It is difficult to craft a scenario under which (loan) origination volumes would come anywhere close to reaching the numbers originally envisioned for the program,” Jay Brinkmann, chief economist for the Mortgage Bankers Association, said this week as he lowered his 2009 forecast for mortgage volumes by 27 percent.
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% from April. More than half have been on the market for almost a year.
The inventory of homes for sale will remain enormous, particularly with increased competition coming from distressed sales of existing homes.
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