Sales of newly built homes fell around 2 percent in May from the previous month, but that was a little better than expectations, given the lousy home builder sentiment number we got this month and the huge supply of competing existing and distressed properties.

But let’s put this monthly move in perspective, shall we?

The 319,000 sales pace is 14 percent higher than the record low set in February, but new home sales are still 77 percent below their peak in 2005, and 900,000 is considered healthy.

But how’s this for an odd statement:

“The one positive in this report was the further fall in the number of new homes for sales, from 172,000 in April to yet another record low of 166,000,” writes Paul Dales at Capital Economics. “With fewer new homes for sale than ever before, at some point homebuilding activity will have to increase, but we can’t see it happening for several years yet.”

That’s the positive??

You could look at the home prices, down 3.4 percent, which is less than the 5 percent drop in existing home prices in May. But then you have to remember all the concessions builders are throwing in, and you also have to look at the fact that the median price of an existing home is 30 percent less than that of a newly built home. How’s that for competition?

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Every time we get the monthly foreclosure numbers from RealtyTrac, I hear someone on TV say, ‘Well, the problem is really only concentrated in a handful of states.”

Yes, the volumes are, the problems are not.

Take a read from the RealtyTrac release:

“Five states accounted for 51 percent of U.S. foreclosure activity in May, led by California, where 51,906 properties received a foreclosure filing during the month.

A total of 19,192 Florida properties received a foreclosing filing in May, the second highest state total despite a 62 percent decrease from May 2010

A total of 14,614 Michigan properties received a foreclosure filing in May, the third highest state total, followed by Arizona, with 13,122 properties receiving a foreclosure filing during the month, and Nevada, with 11,039 properties receiving a foreclosure filing during the month.

Other states with foreclosure activity totals among the nation’s 10 highest in May were Illinois (10,574), Georgia (10,503), Texas (9,055), Ohio (8,379), and Wisconsin (4,660).”

I would argue that despite these numbers, the foreclosure crisis affects every market in every state in the nation, due to the direct correlation to falling home prices.

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