New home sales near historic lows
Sales of new homes last month were slightly higher than expected, but were down 2.5% from April and more than 40% versus last year.
NEW YORK (CNNMoney.com) -- New home sales remained near historically low levels in May, as the housing market continues to struggle with a huge oversupply of housing inventory.
The Census Bureau reported Wednesday that May sales of new single-family homes came in at a seasonally adjusted annual rate of 512,000, down 2.5% from April's revised reading of 525,000.
"The market is still very much in distress," said Jared Bernstein of the Economic Policy Institute. "We are closer to the bottom than we were a year-and-half ago, but we're not there yet."
The reading was higher than the consensus forecast of 510,000, according to estimates compiled by Briefing.com. But home sales are down more than 40% from May of last year and are 63% off the peak reading of 1.38 million homes sold in July of 2005.
Monthly new home sales reached their lowest point in September of 1981, when they tallied just 338,000. The Census Bureau has tracked the data since 1963.
The decline was most pronounced in the West, where new home sales fell 11%, to 114,000 in May from 129,000 in April.
"Where the bubble was inflated the most it's now deflating the fastest," Bernstein said. "That's why the West continues to post double digit losses."
Sales also fell sharply in the Northeast, down 8%, but were flat in the South. May sales in the Midwest increased 5%.
Falling home prices. The report also showed that the median sale price of new homes sold in May was $231,000, down 6% from 246,100 in April. The average sale price fell 3% to $311,300 in May from $321,000 last month.
"There is no way, in my mind, that prices have finished their downward trek," Bernstein said. He thinks prices will decline another 15% before the market stabilizes.
The seasonally adjusted estimate of new houses for sale at the end of May was 453,000, according to the report. This represents a supply of 10.9 months at the current sales rate.
Bernstein said the current overhang of inventory in the housing market is huge - twice the average level - and that this glut of homes will continue to put downward pressure on home prices.
"Keep an eye on that overhang if you want to know where prices are going," he said.
Wednesday's report follows the release of a closely watched index of home prices on Tuesday that showed a record decline in April.
The S&P/Case-Shiller 20-city Home Price Index fell to a record low of 15.3% on a year-over-year basis, and was down 1.4% from March. The 10-city index was down 16.3% year-over-year and 1.6% for the month. 
