June shows new home sales going up

In June, new home sales went up from the record low they were in May. June was nevertheless the second lowest month on record after new home sales dropped so dramatically after the end of the home buyer tax credit. Numerous think the post-tax-credit slump is apparently getting over with. Others think that increasing foreclosures and the stubbornly high U.S. unemployment rate offset the good news.

New home sales increasing doesn’t mean anything

The Commerce Department said on Monday that new home sales jumped 23.6 percent to a 330,000 unit annual rate from a downwardly revised 267,000 units in May. CNBC reports that records weren’t kept until 1963, and since then, June was still the second lowest month. The increase, nevertheless, was the largest since 1980 which offset the historic 36.7 percent decline that was in May. All year, there is an expectation from economists for the U.S. housing market to stay quite low.

Record-low mortgage rates stanch the bleeding

New home sales were expected to be much worse 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. However, increasing foreclosures are swelling the number of unsold existing homes, putting pressure on prices and keeping buyers on the sidelines as unemployment hovers near 10 percent and the economy cools. New home prices are nevertheless falling. From June 2009, the median price for new homes has decreased 0.6 percent to $ 213,400.

U.S. housing market continues to drag on economic recovery

New home sales were 7 percent of the housing market in 2009. Taragana.com reports that number is down from a portion of about 15 percent before the housing crisis. Usually, construction drives economic recoveries which can no longer happen with weak new home sales making jobs less prominent. Each new home built creates, on average, 3 jobs for a year and generates about $ 90,000 in taxes paid to local and federal authorities, as outlined by the National Association of Home Builders. The effect is felt across multiple industries.

Find more information on this subject

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/