Newspaper article THE JOURNAL RECORD

New Home Sales Increase at 0.4 Percent Rate in May

Newspaper article THE JOURNAL RECORD

New Home Sales Increase at 0.4 Percent Rate in May

Article excerpt

WASHINGTON (AP) - New home sales in May rose at an annual rate of 0.4 percent, but were still at virtually their lowest level since the economy emerged from its last recession 7 1/2 years ago.

The government said Friday that the increase - from an annual sales rate of 530,000 homes in April to a rate of 532,000 homes in May - was the first gain in six months.

Most analysts attributed the continuing sales weakness to double-digit mortgage rates, but some said flagging consumer confidence has become a major factor as the job market weakens and wage growth slows.

The Commerce Department reported new home sales totaled a seasonally adjusted annual rate of 532,000 units in May after falling 5.2 percent the previous month.

The government said the decline from March to April was worse than the 1.6 percent drop first reported last month. And the rate of sales in both months was the lowest since 521,000 units were sold in December 1982. The 1981-82 recession ended that November.

The pace of sales during the first five months of 1990 was down 9.6 percent from the same period last year. Actual sales in 1989 totaled 650,000, down from 676,000 units in 1988.

Analysts also expressed concern over the high inventory level. While May's 8.2-month backlog slipped from the 8.4-month inventory in April, it matched the 8.2-month level of July 1982, during the last recession.

The backlog refers to the number of months it would take to sell the existing supply of homes in a given months.

The backlog ``suggests that we're going to have some problems down the road until sales pick up a little bit,'' said Thomas Holloway, an economist with the Mortgage Bankers Association.

Robert Villanueva, forecasting director for the National Association of Home Builders, said the ``uncomfortably high'' level of unsold houses also ``suggests that housing starts will continue to be weak in order to bring starts in line with demand. …

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