General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsNew Homes Sales versus Existing Home Sales
Last edited Mon Jun 25, 2012, 10:46 PM - Edit history (4)
Sales of new homes were up a lot last month, which is very good news. That report prompted this post about why a jump in new home sales, in particular, is good news.
For the last several years the existing housing market has been dominated by distressed sales, which makes the existing home sales figures an ambiguous indicator.
Any increase in new home sales is a solid economic indicator. A new home sale represents construction work and materials sold... real day-to-day economic activity. When new home sales pick up then construction of new homes picks up.
The key figure for existing homes, however, is inventory. The value of existing properties cannot hit bottom until the inventory gets lower. There are so many distressed properties that most existing home sales are of the distressed variety. If the sheriff auctions off ten properties that isn't a sign of a booming market... but it is ten sales. So the question with existing properties is how long it takes to work through all the inventory of distressed properties, and also the huge shadow inventory of underwater homes people plan to sell the second they can break even on them.
Calculated risk does a great jobs with these issues:
Home Sales Reports: What Matters
http://www.calculatedriskblog.com/2012/06/home-sales-reports-what-matters.html
Here's a cool chart from CR showing how tricky it can be to differentiate good news and bad news. At a glance, one would think that existing homes had held up well and the real problem was new homes. But the seeming relative strength of existing home sales has been all about forced sales, distressed properties, abnormally low prices, etc..
cthulu2016
(10,960 posts)spanone
(135,802 posts)FarCenter
(19,429 posts)Is this a "resale" when the builder buys the tear down, and a "new home" when the builder sells it?