Posted by Joseph Y. Calhoun, III

New home sales in May fell to an annualized rate of 342,000. That’s down 0.6% from the April rate of 344,000 which was revised lower from an originally reported 352,000. The median sales price was $221,600 down from $229,300 in May 2008. That’s the smallest drop in median sales price this year and was up 4.2% from last month. Inventory is 292,000 units, the fewest since 2001, down 2.3% from April. That represents 10.2 months of supply at the current sales pace down from 10.4 months in April. Full report from Census.

This report is consistent with the bottoming of the housing market. Builders are having a difficult time competing with the foreclosure market and inventory remains high based on the current sales pace. I would not expect new home sales to rise until overall inventories fall to more normal levels, but once they do, building activity should pick up significantly.