Sales of new homes in the U.S. fell in May for the first time in three months as Americans are buying fewer new homes, evidence that the housing market is still struggling to gain momentum.
Data released by the Commerce Department showed sales dropped 2.1 percent to a 319,000 annual pace last month, compared to a forecasted 310,000 rate. Meanwhile, on a year to year basis, the median price of new homes sold dropped from a year earlier.
One factor contributing to the dip in new home sales is the fact that almost 2 million distressed properties will reach the market, which is a huge number for new home builders to contend with. Such a number will take years to absorb as the unemployment rate remains elevated at around 9 percent. Some home buyers prefer to opt for buying these foreclosed homes at a cheaper price than new homes.
“Things are still going to be weak for a while,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “We need to see much better job growth and more confidence in general,” he said, adding that new-home sales are “still sort of bouncing around the bottom.”