New home sales exceeded gloomy forecasts in June, rebounding from a record low in May. Ever since the end of the homebuyers tax credit, new home sales have gone down a lot which makes June nevertheless the second lowest on record. Many think the post-tax-credit slump seems to be getting over with. Others think that increasing foreclosures and the stubbornly high U.S. unemployment rate offset the optimistic news.
New home sales beat forecast, but that’s not saying much
Monday the Commerce Department reported from May to June, the unit annual rate went up 2.36 percent from 267,000 to 330,000. CNBC reports that the pace of new home sales in June was still the second lowest since records started being kept in 1963. The increase, however, was the largest since 1980 which offset the historic 36.7 percent decline that was in May. Even so, economists expect a weak U.S. housing market to be a drag on U.S. economic recovery for much of the year.
Record-low mortgage rates stanch the bleeding
New home sales weren’t as bad as expected, in part because of the lowest mortgage rates on record. Since 1930, there has never been a worse recession which has been stabilized by the mortgage rates that are so low. Since unemployment is at 10 percent, most are unwilling to put their money into a home when foreclosures are leaving more and more homes unsold. New home prices are continuing to fall. The median price for new home sales decreased 0.6 percent from June 2009 to $ 213,400.
Housing market determines economic recovery
Last year, 7 percent of the housing market was from new home sales. the number is down 15 percent from before the housing crisis, reports Taragana.com. Construction jobs are dropping with weak new home sales meaning the economic recovery can no longer be driven by the construction industry, which historically has been the driving force. Each home that is built gives 3 new jobs and $ 90,000 in taxes to the government. Many individuals feel the effect of this.
Additional reading
CNBC
cnbc.com/id/38412228
Bloomberg
bloomberg.com/news/2010-07-26/sales-of-u-s-new-houses-climb-to-330-000-more-than-economists-forecasts.html
Taragana.com
blog.taragana.com/business/2010/07/26/new-us-home-sales-in-june-tick-up-slightly-but-remain-low-as-demand-for-housing-slumps-82763/
