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Home Sales Recovery – A Mixed Bag

[Post Category: Industry News]

Sales of existing homes shot up in July. Sales of new homes fell. Behind the numbers, however, lurks the same old story: The housing market has yet to fully recover.MixedBag

The Commerce Department reported Monday that new-home sales dropped 2.4 percent from June to a seasonally adjusted annual rate of 412,000. Normal would be closer to 800,000, industry figures show, which means sales are only about halfway back to where they should be.

Just a few days earlier, the National Association of Realtors reported that sales of existing homes jumped 2.4 percent in July to their highest level since September, reaching a seasonally adjusted annual rate of 5.15 million. That’s closer to where it should be but not quite there. Based on the size of the population and recent job gains, a normal sales rate would be 5.5 million or more.

This helps explain why the mix of homes available to potential buyers is out of whack.

In more normal times, six existing homes are sold for every new home, said Jed Kolko, chief economist at Trulia. During the depths of the housing bust, the ratio reached 14 to 1. Now the ratio is closer to 12.5 to 1 — even though 41 percent of Americans surveyed by Trulia say they would prefer to buy a new home over one with previous owners.

“It’s a sign that the recovery still has a ways to go,” Kolko said. “The most important thing it tells us is that single-family construction is still way below where it was even before the bubble.”

The decline in new-home sales doesn’t mesh with other recent data. Last week, the Commerce Department reported that housing construction took off in July, reaching the highest level in eight months. While most of that activity was driven by the construction of apartment buildings, starts of single-family homes increased 8.3 percent.

The industry’s closely watched sentiment index released last week found that builder confidence in the market for newly built, single-family homes rose two points in August to its highest level since January. Meanwhile, mortgage rates have remained low, which should be helping the new-home market.

The July sales figures may look better in a month or so. New-home sales numbers are inherently volatile because they draw from a small sample size, and they are often revised, sometimes dramatically.









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