U.S. Housing Bubble Deflates

The U.S. housing bubble, which had been building for months and months, deflated just a bit in May.

Sales of existing homes, a category that includes single-family homes, townhouses, condominiums and co-ops, slipped seven-tenths of a percentage point in May to a seasonally adjusted annual rate of 7.13 million last month from a record rate of 7.18 million in April, the Chicago-based National Association of Realtors (NAR) reported on June 23. May's figure was the second highest on record -- although below the 7.15 million rate that economists generally expected.

"Most of the stars continue to be correctly aligned for the housing market," says David Lereah, NAR's chief economist. "An ongoing problem is the tight supply of homes available for sale, which is pushing gains in home prices." According to NAR, the U.S. median price for existing homes in May this year was $207,000, some 12.5% higher than the median price of $184,000 in May 2004.

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