Gross Domestic Product (GDP)
Real GDP increased at an annual rate of 1.9% in the first quarter, following growth of 3.1% growth in the fourth quarter of 2010, the Bureau of Economic Analysis (BEA) reported in its third revision of first quarter GDP. The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures, private inventory investment, exports, and nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, also increased. Consumption increased at a 2.2% annual rate, down from 4% in the fourth quarter of 2010. Despite the relative decline, this was still a relatively strong showing in the face of higher gas prices and bad weather. We expect the pace of growth to pick up a bit over the remainder of the year.

New Home Sales
New home sales fell by 2.1% in May to a seasonally adjusted annual rate of 319,000 from 326,000 in April. Over the year sales are up 13.5%. The inventory of unsold homes fell in May to 166,000 from 172,000 in April. At the current sales rate the months’ supply is 6.2, down from 6.3 in April. Median home prices fell 3.4% from a year ago. Over the year prices are a volatile measure, especially since few sales are occurring. This report is further evidence that we are unlikely to see much improvement in the housing market this year.

Existing Home Sales
Existing home sales fell 3.8% in May to 4.81 million annualized units from a downwardly revised 5.00 million in April. Over the year sales are down 15.3%. Inventory fell 1% to 3,720,000 from 3,759,000 in April. At the current sales rate the months’ supply is 9.3, up from 9.0 in April. Median home prices increased 3.2% in May to $166,500, from $161,100 in April. Over the past year prices are down 4.6%. Sales in May were a bit lower than in recent months, and we are far from a healthy housing market.