New-home sales rose 4.6% in May, but economists are cautioning that the rebound in sales that started in March is deceptive and that the real trend is downward.The U.S. Census Bureau reported new single-family home sales increased from a seasonally adjusted annual rate of 1.18 million in April to 1.23 million in May. However, sales are down 9.6% for the first five months of this year, compared with those of the same period in 2005 on a seasonally adjusted basis. Phillip Neuhart, a Wachovia Corp. economic analyst, said the government's sales numbers do not account for sales contract cancellations, and "builders are reporting a very large level of cancellations." With sales moderating on a year-to-year basis, he said, homebuilders have 127,000 completed homes for sale as of May 31. Builders are "beginning to face" an inventory problem, Mr. Neuhart said, and "you hope to see that number contained" in the coming months.

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