New-Home Sales Plunge 32.7%

NEW YORK (TheStreet) -- New home sales fell by 32.7% in May, in the second consecutive day of bad news from the U.S. housing market. The plunge was worse than the consensus expectation for a drop in new home sales, though short of the most dire forecast.

Economists had expected new home sales to plunge as much as 19% from a month earlier to a seasonally adjusted annual rate of 410,000. A second Street consensus was for a rate of 423,000 new homes sold. The worst forecasts were for a 41% plunge to a level of 295,000 new homes sold.

The actual level of the new home sales drop to 300,000 homes represented a 47-year low.

While the drop in new homes sales was expected as a result of the end of the federal homebuyer tax credit, Tuesday's weak existing home sales report helped to take the markets down, as economists had predicted that existing home sales would rise from April's level. The 32.7% drop, far surpassing the consensus estimate, is another downer for the U.S. economy.

Existing-home sales were down in May by more than 2%, defying the expectation of most economists who predicted a rise to a level above 6 million units. The just-under 5.7 million units of existing homes sold in May was well below the consensus estimate of close to 6.2 million. The April figure for existing home sales was upwardly revised to 5.8 million units. The April sales gain was 8%.

An important difference between the existing home sales data from Tuesday and new home sales report on Wednesday is that the new home sales plunge was even worse than the new home sales level from a year ago in May 2009. Even with the existing home sales disappointment on Tuesday, the level of existing home sales was still above the year ago level. The year over year plunge in new homes sales was 18%.

Last week, the National Association of Home Builders said builders' confidence about the housing market index fell to 17 in June, sinking five points after two straight months of increases. It was the lowest level since March.

Pending home sales are expected to decline notable in May and June also, the NAR said.