INSTANT VIEW: New home sales fall in May

NEW YORK (Reuters) - U.S. sales of newly constructed single-family homes fell 2.5 percent in May to a 512,000 annual rate and were down over 40 percent from a year ago, government data on Wednesday showed.

KEY POINTS:

* Economists polled by Reuters were expecting new home sales to slow to a seasonally adjusted 510,000 rate last month from 525,000 in April, revised down from 526,000 previously reported, according to data released by the Commerce Department.

* The inventory of new homes available for sale in May dropped 1.7 percent to 453,000, which was the thirteenth consecutive monthly decline. The May sales pace put the supply of homes available for sale at 10.9 month's worth, the Commerce Department said.

COMMENTS:

RUDY NARVAS, SENIOR ANALYST, 4CAST LTD, NEW YORK:

"I don't think this changes the big picture at all, everything was in line with expectations and you still have a high level of unsold inventory out there. We saw median home prices actually fall this month after being flat the previous month. The trend continues to be down. While we are seeing a slowing in the pace of new home price declines, I think that further declines will be necessary for the market to clear."

THOMAS NYHEIM, PORTFOLIO MANAGER, CHRISTIANA BANK & TRUST CO,

GREENVILLE, DELAWARE:

"It takes seven to ten months to build a home and they want to be in before the winter -- the new-home selling season has slightly passed. It's probably already in the market. You're into the summer months and everything goes slow."

CHRISTOPHER LOW, CHIEF ECONOMIST, FTN FINANCIAL, NEW YORK:

"The decline is keeping new home sales on the same trend of the past two years. It is hard to say anything is improving.

"One of the most puzzling aspects of the recent data is the relative outperformance of the existing home sales versus new home sales.

"The big drop in median home prices reflects the pickup in foreclosures which would cause a major repricing in homes.

"We ought to see a new equilibrium in demand and supply in the next year or so."

BOB WALTERS, CHIEF ECONOMIST, QUICKEN LOANS, LIVONIA,

MICHIGAN:

"The market is continuing to react to all the changes. We've seen home values drop so there's reluctance by the public to purchase homes. Mortgage credit has gotten tighter so we see less demand for housing for a number of reasons, less supply of money so this is the natural result of that. I don't think we've seen the bottom although we're certainly getting closer to it."

BRIAN DOLAN, CHIEF CURRENCY STRATEGIST, FOREX.COM, BEDMINSTER,

NEW JERSEY:

"The month's supply increased to 10.9 from 10.7, which is very close to the cycle peak of 11.4 back in March and continues to suggest that price capitulation has thus far had no impact on bringing the massive housing inventory overhang lower. This continues to be a negative for home prices going forward. Still, the result was largely as expected and this is not enough to alter the waiting game ahead of the FOMC this afternoon."

MATTHEW STRAUSS, SENIOR CURRENCY STRATEGIST, RBC CAPITAL

MARKETS, TORONTO:

"Overall, very much in line with expectations. It's not going to move the market ahead of the FOMC decision."

ERIC KUBY, CHIEF INVESTMENT OFFICER, NORTH STAR INVESTMENT

MANAGEMENT, CHICAGO:

They (the housing numbers) didn't seem to move the (stock) market. That's a positive, there's no incremental bad news.

MARKET REACTION:

* BONDS: U.S. Treasury debt prices remain lower

* CURRENCIES: U.S. dollar remains down slightly against the euro and up slightly against the yen

* STOCKS: U.S. equity indexes hold early gains

* RATE FUTURES: Fed fund futures steady, showing a 74 percent chance of a rate hike at the Fed's meeting in August.

EARLIER DATA FROM JUNE 25:

Durable goods orders for May:

U.S. weekly mortgage index