A government report to be released Wednesday is forecast to show that new home sales fell in May after an unexpected increase a month earlier.

The Commerce Department is expected to report that new home sales dipped 2.1 percent in May to a seasonally adjusted annual rate of 515,000 units, according to the consensus forecast of Wall Street economists surveyed by Thomson/IFR. The report is scheduled to be released at 10 a.m. EDT.

The government last month reported that new home sales rose 3.3 percent in April to a seasonally adjusted annual rate of 526,000 units. Still, the government revised March activity downward to an annual rate of 509,000, the weakest sales pace since April 1991.

Builders such as Centex Corp., Pulte Homes Inc. and Hovnanian Enterprises Inc. have been caught with a glut of unsold properties over the past year as mortgages became harder to get and sales slowed. Builders have slashed prices, but many buyers remain on the sidelines, waiting and watching for bigger discounts.

Economists believe that new home sales will remain weak as the housing industry struggles with falling prices and rising foreclosures, which are dumping even more homes on an already glutted market. Economists believe that home prices will remain under pressure until the number of unsold properties is worked down to more manageable levels.

Where I live we have for years been able to buy a fairly decent average home, nothing really fancy of course, for less than what it costs to buy a new pickup or nice car. This has always seemed kind of crazy to me and now the imbalance will get even bigger.

We bought our house 10 years ago, an older 6 room 2 bath home with solid wood walls and eleven foot ceilings we remodeled, and last year we got an estimate to build one good sized room onto the house and the one room cost as much as we paid for the house, same thing for everyone around here who builds on. Building a new home costs many many thousands more than buying an older home of the same size even though the older home is better built with higher quality wood, material, and workmenship.

I read houses will recover in two years

 really

here in CA, with housing prices still astronomically high, I am hoping for more decreases 

Thanks for the info.

Come to Dallas. It's quite stable here.

donwilliams2:

I read houses will recover in two years

 Buy a foreclosed home.

Booya.