Numbers for May’s new home sales are in, and it appeares that there has been an unexpected fall. Analysts thought that there would be an increase in new home sales, driven by government programs, low mortgage rates and low home prices. However, new home sales fell instead.

This is line with some opinions that the housing market will continue to languish through this year and maybe next year, and begin to see some increased activity in 2011. The housing market is not expected to stabilize and begin thriving until 2012.

One of the biggest reasons that new homes sales are falling is due to the preference for existing homes. New construction just can’t compete with the bargains offered by existing homes. In many cases, home owners are willing to deal, selling for below market value. Additionally, foreclosures make up a relatively substantial number of existing home sales. It’s hard for a builder with fixed costs to compete with those kinds of deals.