New-home sales declined 2.5 percent in May, after registering their first increase in five months during April, according to the United States Census. Sales of new homes fell on a seasonally adjusted basis to 512,000 units in May, from 525,000 units the previous month.

New-home sales peaked in this cycle on a seasonally adjusted basis in July 2005, at 1.371 million units. The low point so far during the current bust was registered in March, which has been revised several times and is now recorded at 501,000 units, according to the Census.

Wall Street analysts were predicting 515,000 new-home sales for May, according to Forbes. New-home sale prices also declined in May, with the median sale price declining to $231,000 from $243,500 in April, and average sale prices declining to $311,300 in May from $321,200. Both price indicators have moved up and down over the last few months, with low points for both falling in October.

Inventory of new homes also increased, rising from a 10.7 months' supply in April to a 10.9 months' supply in May. Inventory hit its peak of an 11.4 months' supply in March.

Both sales and prices will likely continue a downward slide through the remainder of 2008, says John Burns, president of John Burns Real Estate Consulting in Irvine, Calif. Burns just received the results of a new survey his company put out to builders, and with 283 responses from across the country, Burns says a picture of further declines in both sales and prices is emerging.

Builders were asked by Burns to rank their sales from one to 10 (with 10 being the high point). The average score was two. Asked to rank their sales expectations for the next six months, builders averaged a score of three, Burns says.

"There are a few markets that are starting to improve, but Texas and the Carolinas are in the midst of their slide right now, and they're a big drag on the national numbers," Burns says.

While Burns won't predict a new low point for sales, he concedes that "we've been predicting a low of 500,000, but clearly it looks like it's going lower."

Burns' survey did show one bright spot. Sales per community increased slightly in the Rockies, Pacific Northwest, parts of Texas, and even in Southwest Florida, Burns says. But sales plummeted in Northern California, the Midwest, the Carolinas, and the Mid-Atlantic, he reports.

Stocks rose slightly Wednesday morning, as the Dow Jones Industrial Average, which opened Wednesday at 11,805.31, skipped to 11,872.65 by 10:45 a.m. But that was mostly based on the Census' report from earlier Wednesday that new orders for durable goods manufactured in the U.S. were unchanged in May after two straight months of decline.

In the 40 minutes after new-home sale data were released, the DJIA did increase slightly from 11,835.03.

Investors Wednesday were also awaiting a policy statement by the Federal Open Market Committee, which sets the Federal Funds rate. The statement, scheduled to be released at 2:15 p.m. EDT, will be read carefully to see how the Federal Reserve Board is weighing the risk of inflation against the current slow growth of the economy.

Ethan Butterfield is senior editor, business, for BUILDER magazine.

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