New home sales slip in May

The latest new home sales figures just hit the tape. According to the Census Bureau, sales fell 2.1% between April and May. The seasonally adjusted annual rate of 319,000 was slightly above expectations for a reading of 310,000. Sales fell 3.5% in the West and 26.7% in the Northeast; they were unchanged in the Midwest and up 2.4% in the South.

The raw number of homes for sale keeps falling. It slipped to 166,000 in May from 172,000 a month earlier. That's the lowest level in the history of record keeping, which dates back to 1963. The "months supply at current sales pace" indicator dipped slightly to 6.2 from 6.3. Median prices gained 2.6% on the month to $222,600 from $217,000, but that was still down 3.4% from a year earlier.

Signs of life in the new housing market? Not yet. Sales slumped anew in May, while pricing remained weak on a year-over-year basis. I can't say it enough: We're clearly UNDERsupplied now in the new home industry. But builders have little incentive to build with all the competition they face from nearly-new, distressed homes. That means construction activity and construction hiring will remain anemic, undercutting the economic recovery. Bottom line: The housing market will likely remain lackluster for a period of years, not months or quarters.

Existing home sales slump in May

The National Association of Realtors reported on existing home sales figures for May today.

* Sales slumped 3.8% to a seasonally adjusted annual rate of 4.81 million from 5 million in April. That was right in line with expectations and it leaves sales at the lowest level since November.

* Single-family sales dropped 3.2%, while condominium and co-op sales fell 8.1%. Sales slumped in most of the country, dropping 2.5% in the Northeast, 5.1% in the South, and 6.4% in the Midwest. They were unchanged in the West on the month.

* The months supply at current sales pace indicator of inventory climbed to 9.3 from 9. That's also the highest reading since November. The raw number of homes for sale slipped 4.4% from a year ago to 3.72 million. The median price of a used home fell 4.6% from a year ago to $166,500 from $174,600. That was up 3.4% on the month, however.

Home sales remain depressed in the U.S. Sales fell to a six-month low, with transaction volume sinking or flat in all regions of the country. Chalk the weakness up to the same factors we've been discussing for some time: A lack of buyer confidence, a continued influx of distressed inventory, tighter credit standards, and a slowing economy. Buyers simply don't have the motivation or ability to snap up homes, and there is no reason to expect that dynamic to change for some time.