August new home sales had been announced by the Commerce Department last week.
The August new property sales market continues to struggle simply because of the high inventory of houses and the lagging economy. Housing marketplace trends are extremely depressed. This is having a devastating impact on homeowners hoping for an economic upturn.
The annual rate for August was 288,000, the same as the revised number for July. This number is only 2.1% greater than the lowest month in recorded history. This lowest level was in May well, 2010. Economists had projected a 6.9% improve in August new property sales or 300,000 units. The actual numbers certainly fell far brief.
The federal government first time buyer tax credit program ended in April of this year. May well saw a sizable drop in housing sales. This large drop was primarily due to the rush by homebuyers to obtain houses prior to the expiration of the tax credit. The tax credit seemed to only move housing sales from a later period of the year to the period when the tax credit was provided.
Today’s sales of new and existing homes are becoming negatively affected by high unemployment, tight credit standards, and the concern about continued housing cost declines.
A surging housing marketplace has always been instrumental in driving the economy out of a recession.
The weak August new residence sales numbers indicate that the housing marketplace is far from a recovery. This is bad news for those hoping for a near term economic recovery.
Housing marketplace trends are going in the wrong direction. But new homebuilders are making the scenario worse. New housing starts came in at an annualized rate of 598,000 in August. Housing starts had averaged 567,000 during the last four months. With the August new residence sales of 288,000, it’s simple to see that builders are adding to the inventory of unsold homes.
Builders ought to compete with a large inventory of foreclosed homes with numerous far more coming onto the marketplace.
I’ve said this prior to. In order for the housing marketplace to stabilize, housing costs must come down to a fair market value. Government intervention is only postponing the time when the housing recovery can really begin. Until we see the end of this, housing market trends will remain negative.