Home Sales Show Unexpected Rise

Rising mortgage rates made most economists think that home sales would continue to drop off in May. But an unexpected rise in new home sales made people wonder; could the housing market be on the mend? Not necessarily, according to the Commerce Department, which reported the 4.6% rise in new home sales and followed up by pointing out that the median home price dropped by 4.3%. This means that, though more houses are selling, profits should not be expected to rise very much.

It is expected that sales for new and existing homes will continue to fall as much as 10% from 2005. The sharp rise in mortgage rates has stalled a market that was moving up for the last five years in a row, resulting in many homes staying on the market for extended periods of time. Analyst believe one reason for the rise in May is that home sellers dropped prices of properties listed for months or even years, leading to the increase sales but the drop in median sales price.