The record low in May didn’t keep new home sales from jumping in June. 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. People believe the post-tax-credit slump hasn’t been as bad as predicted and is almost over. Others think that increasing foreclosures and the stubbornly high U.S. unemployment rate offset the optimistic news.
New home sales up, but up is not better
The annual rate for units in May was 267,000 when it jumped in June 22.6 percent to 330,000 reported the Commerce Department on Monday. CNBC points out that new home sales in June was still the second lowest since 1963 when records began being kept. The historic 36.7 percent decline in May was offset by this increase which was the largest since May 1980. Even with this great increase, it is expected that the U.S. housing market will continue to do poorly all 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. Bloomberg reports that record low mortgage rates are serving as a stabilizer for the U.S. housing industry that triggered the worst recession since the 1930s. You will find an increasing number of homes without tenants because of the foreclosure rate along with the 10 percent unemployment rate holding people back. New home prices are continuing to get lower and lower. $ 214,400 has become the new median price for new homes which is a 0.6 percent decrease from last year.
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 the number has gone down 15 percent from where it was before the housing crisis happened. Generally, 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, according to the National Association of Home Builders. The effect of this is felt throughout the country.
Further 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/
