New Homes Sell at Fastest Pace in 2 Years

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By Martin Crutsinger

WASHINGTON -- Americans bought new homes in May at the fastest pace in more than two years. The increase suggests a modest recovery in the housing market is continuing, despite weaker job growth.

The Commerce Department said Monday that sales of new homes increased 7.6 percent in May from April to a seasonally adjusted annual rate of 369,000 homes. That's the best pace since April 2010, the last month that buyers could qualify for a federal homebuying tax credit.

Even with the gains, the annual sales pace is less than half the 700,000 that economists consider to be healthy.

Yet the increase follows other signs that show the housing market is improving nearly five years after the bubble burst.

Builders are slowly gaining confidence in the market and starting to build more homes. Mortgage rates have plunged to the lowest levels on record, making homebuying more affordable. Prices remain low and have started to stabilize. And sales of previously occupied homes are much higher than the same time last year.

Though new homes represent less than 20 percent of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to the National Association of Home Builders.

One reason prices could rise is that the supply of new homes for sale remains extremely low.


Pros and Cons of Buying a New Construction Home



Just 145,000 new homes were for sale in May. That's not much higher than the 144,000 available in April, which was the lowest on records dating back to 1963. At the current sales pace, it would take 4.7 months to exhaust the supply, well below the six-month supply that is generally considered healthy by economists.

"With no excess inventory of unsold new homes, any sustained rebound in new home sales should quickly translate into firmer prices," said Steven Wood, chief economist at Insight Economics.

The median price of a new home sold in May edged down 0.6 percent from the April to $234,500. But the price was 5.6 percent higher than the same month one year ago.

Builders are responding to the low supply. In May, they requested the most permits to start construction on homes and apartments in 3½ years.

The gains in new homes sold were concentrated in two regions of the country last month. Sales surged 36.7 percent in the Northeast and 12.7 percent in the South. Sales fell 10.6 percent in the Midwest and were down 3.5 percent in the West.

Sales of new homes are increasing despite a sluggish job market, which has slowed retail spending and business investment in computers and machinery. Some economists warned that the weaker job market has also started to affect some home sales.

Sales of previously occupied homes fell in May to a seasonally adjusted sales rate of 4.55 million after nearly touching a two-year high in April.

Still, re-sales have risen 9.6 percent from the same month last year.

Hiring slowed sharply in April and May, raising concerns about the strength of the recovery. Employers have added an average of only 73,000 jobs a month in April and May. That's much lower than the average of 226,000 added in the first three months of this year.

Copyright 2012 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.

See also:
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5 Things That Can Derail Your Home Sale


26 PHOTOS
Charming Homes You Can Score for $150,000
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New Homes Sell at Fastest Pace in 2 Years

If you're a buyer, this is the real estate market of your dreams. With home prices severely deflated, you can score an unbelievable deal -- such as these charming abodes available for a mouth-watering $150,000. In a healthy real estate market, they'd be well over twice that. Click through to see what type of pads can be had for such a low price.

Location: Atlanta
Beds/baths: 3/2
Sq. ft.: 1,467

This adorable home was completely renovated and expanded in 2006, with the addition of a master suite, a screened porch, skylights and a new deck. You're getting a huge package for a low price!

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The home has gleaming hardwood floors throughout, and what used to be a side porch is now the perfect office.

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Lounge on the home's screened porch, and enjoy a peaceful summer day (or night) free of bugs!

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Location: Minneapolis
Beds/baths: 3/1
Sq. ft.: 1,250

You're getting big bang for your buck with this home! It has a remodeled bathroom and master suite (with skylights), a modern kitchen and a deck with a fire pit!

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Lush wood envelops the living and dining areas.

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You'll get a spacious backyard perfect for families with young kids, who need room to play! For the adults, pour a cocktail and lounge under an umbrella on the home's new deck.

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Location: Phoenix
Beds/baths: 3/2
Sq. ft.: 1,656

It's getting warmer outside, so drink in this mouth-watering home in Arizona's capital. You'll get mountain views from this house, the perfect summertime oasis.

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The open layout will give you a ton of room, and the floorplan is ideal, with a kitchen off the large living room.

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The large master bedroom with tall ceilings has its own master bath, which has a separate shower, a tub and dual sinks.

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Location: Creve Coeur, Mo.
Beds/baths: 3/3
Sq. ft.: 1,626

An unbelievable price for a daring and stunning piece of architecture! Besides your wicked cool roof, the neighbors will be whispering about how little you paid for the home!

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Check out the super-modern layout, with tall ceilings for an airy feeling. (Not bad for Missouri!)

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The master bedroom is palatial, with sprawling space and its own bathroom.

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Location: Las Vegas
Beds/baths: 3/3
Sq. ft.: 2,145

With over 2,000 square feet on a corner lot in a gated community, it shouldn’t come as much of a surprise that given the state of the Nevada market this supremely cheap home is a foreclosure, and is being sold “as is.”

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The home was built in 2007 and appears to be in pretty good shape. But as the listing agent stresses, it's completely up to the buyer to make sure the house is in a suitable condition.

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Location: Reno, Nev.
Beds/baths: 3/3
Sq. ft.: 1,592

A home with mountain views, this is quite the stunner for $150,000. This home features an open floor plan with a ceiling fan in each of its three bedrooms. The home was painted only two years ago and was landscaped even more recently.

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The comfortable living room is wired for surround sound and has a fireplace.

See the listing for more details.

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The open kitchen space has granite counters, a large center island, a pantry and a separate eat-in area.

See the listing for more details.

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Location: Denver
Beds/baths: 1/1
Sq. ft.: 698

A cheap price in a great location! A cute condo in this building is walking distance to downtown Denver's high-class shopping and dining.

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The condo unit has a patio overlooking Denver's capitol building and features wood floors throughout.

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The charming condo also features a gas fireplace and a washer/dryer!

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Location: Honolulu
Beds/baths: 1/1
Sq. ft.: 513

The location is what makes the $150,000 price tag on this Honolulu condo. It's a short walk to beaches, shopping and restaurants. Who cares if it's on the small side -- you're in the middle of everything!

See the listing for more details.

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The condo is newly renovated and includes a custom kitchen with stainless steel appliances, a travertine bathroom and wood laminate flooring throughout.

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The building also features a spacious tiled lanai with views of the nearby harbor and a private pool. Get a real slice of Hawaiian living without taking a big slice out of your wallet.

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