New-home sales, prices drop in May

Sales of new homes tumbled for the sixth time in seven months in May while median prices kept plunging, underscoring the depth of the nation’s housing woes.

The Commerce Department reported Wednesday that new homes were sold at a seasonally adjusted annual rate of 512,000 units in May, down 2.5% from the April level. The median price of a new home sold last month fell to $231,000, down 5.7% from a year earlier.

The report on new-home activity in May followed reports Tuesday that showed record home price drops in April, indicating the nation’s housing slump is not only deepening but also widening.

The inventory of unsold homes rose to 10.9 months in May, meaning it would take that long to exhaust the current supply of unsold homes. Because of the unusually high inventories, economists believe that home prices will keep falling until the spring of next year.

For May, new-home sales were down the most in the West, falling 11.6%. Sales dropped 7.9% in the Northeast. But sales posted increases in the Midwest of 5.1% and were up 0.4% in the South.

The median price of a previously owned home in California fell 35% in May from the same period a year earlier, the California Assn. of Realtors said in a separate report Wednesday.

Home sales rose 18% and exceeded an annualized, seasonally adjusted rate of 400,000 last month for the first time since early 2007, the group said. The increase came because of more “distressed sales,” the Los Angeles-based group said.