New home sales surge, but prices fall

[Gunit_Sangh]

Demand seen remaining strong amid low mortgage rates
The Associated Press
Updated: 10:37 a.m. ET June 24, 2005

WASHINGTON - Sales of new homes in May climbed to the second highest level in history, but the median sales price fell sharply, the government reported Friday.

The Commerce Department said that sales of new single-family homes rose by 2.1 percent last month to a seasonally adjusted annual rate of 1.3 million homes. But the median sales price dropped 6.5 percent to a median $217,000, the point at which half the homes sold for more and half for less.

The housing market has been red-hot this year with demand being driven by mortgage rates that have hovered near historic lows. However, the surge in demand has raised concerns that a speculative fever is creating a housing bubble similar to the stock market bubble that burst in early 2000.

The strong new home sales followed a report Thursday that sales of previously owned homes totaled 7.13 million units at an annual rate in May, a slight decline from the record April pace, but still the second fastest sales rate on record for existing homes. The median sales price of existing homes continued rising in April to hit a record of $207,000.

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