New home sales fall in US, sign of persisting housing slump

Jun 24, 2009, 16:33 GMT

Washington - Sales of new homes fell in the United States in May, the US Commerce Department reported Wednesday in a sign that the housing market that fuelled a global recession has yet to stabilize.

Sales fell 0.6 per cent in May compared to the previous month to an annualized rate of 342,000. The rate is down 33 per cent from May 2008.

The US construction industry has been reeling from a lack of demand for new houses.

Instead, many buyers have turned to cheap deals on existing homes that are in foreclosure - a key driver of the deep US housing downturn. Prices for existing homes have plunged 17 per cent since last year, the National Association of Realtors (NAR) said Tuesday.

More than 1 million homes are currently in foreclosure in the US. Mortgage defaults have cost US and European banks hundreds of billions of dollars and helped push the global economy into its first recession since World War II.

The NAR said existing home sales rose 2.4 per cent in May to an annual rate of 4.77 million. Together with an increase in April, it marked the first back-to-back monthly gain since September 2005.

About one third of homes sold in May were foreclosures, the NAR said. That is down from nearly 50 per cent earlier this year.