New home sales dropped in May

In the past two years, sales have dropped off 18 percent; last year new-home sales hit their lowest level in more than 50 years in 2010. 

On Tuesday, a separate report showed that sales of previously owned homes dipped in May to their lowest level in six months. 

Home sales dropped 3.8 percent, down to a 4.81 million annual pace, the slowest since November, the National Association of Realtors said. 

Sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, were downwardly revised to 5 million in April, and are 15.3 percent below a 5.68 million pace in May 2010 when sales were up as homebuyers took advantage of a federal tax credit.

About six million homes are sold a year in a healthy market, economists say.

Sales have fallen each year since 2006, when the housing market crashed, hitting a 13-year low in 2010. 

The housing market continues to underperform, dragging down the economic recovery that in recent months has lost steam behind a slowing labor market expansion and high fuel and food prices. 

The sector has been further hampered by tight lending standards, high unemployment and dropping prices created by a glut of distressed homes on the market. 

Despite those issues, mortgage rates have remained low and would otherwise be encouraging purchases. 

The average rate on the 30-year fixed loan held steady at 4.50, Freddie Mac said Thursday. The average rate on the 15-year fixed mortgage, was up slightly this week to 3.69 percent, up from a yearly low of 3.67 percent.

Rates typically track the yield on the 10-year Treasuries, which have been dropping in recent weeks. 

The number of new homes on the market fell again in May to its lowest level on record — 166,000 homes — meaning it would take about six months to clear the market. 

Although new homes are only about 20 percent of the housing market, they pack a powerful economic punch, with each new home creating three jobs on average and about $90,000 in taxes, according to the National Association of Home Builders.

Still homebuilders have been restrained in their building as their confidence has plummeted with the market’s lack of sales as home buyers seek out deals on foreclosed homes, which tend to run about 20 percent cheaper than new homes.