New home sales expected to show further gains in May

Associated Press

The Commerce Department reports on sales of new homes in May. The report will be released at 10 a.m. Eastern on Tuesday.

SALES UP: The expectation is that sales of new homes rose 1.6 percent in May to a seasonally adjusted annual rate of 440,000, according to a survey of economists by data firm FactSet.

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SPRING REBOUND: Sales recovered in April after slumping in the previous two months, but the pace remained slower than it was a year earlier.

Demand for newly built homes remains one of the missing pieces in the 5-year-old recovery from the recession.

Sales of new homes are running at about half the rate of a healthy real estate market.

However, there have been some encouraging recent signs of improvement in housing.

The National Association of Realtors reported Monday that sales of previously owned homes jumped 4.9 percent in May, the biggest one-month gain in nearly three years. That increase pushed the sales rate to 4.89 million homes, the strongest showing since last October.

Economists were encouraged by the second straight monthly gain in existing home sales although they noted that the sales rate is still below the recent peak of 5.38 million sales hit last July.

Higher mortgage rates and the bad weather weighed on sales of both existing and new homes in late 2013 and early 2014. But sales seem to be staging a rebound, helped by solid job growth and growing inventories of homes for sale, a development that has helped to hold down price increases.

Economists believe there is significant pent-up demand for homes as many potential buyers put off purchases over the past few years because of concerns about the economy.