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A construction worker installs a window in a new home in San Mateo, California. Home sales declined in June nationally, but rose slightly in the West.
The Commerce Department just released data on new home sales, and the data overall is not good. Sales fell by a worrying 8.4 percent in June. This erases last month's impressive gain of 7.9 percent (which was revised up slightly). The silver lining in this dark cloud is that compared to last June, sales are up nationally by about 15 percent.
Regionally, the Northeast was completely crushed, with a 60 percent decline in June from May. But the West held up with a 2.1 percent gain.
The news contrasts with recent speculation that the housing market in the U.S. is forming a bottom for falling prices (you have to be careful, though, about assuming that sales data and prices data are somehow connected.)
There's another factor to take into account, however. As Reuters points out, housing inventories are "near record lows," at least where new homes are concerned. What's holding back a more robust recovery is the sluggish economy — it only grew at 1.9 percent in the first quarter and added on average less than 80,000 jobs in the second quarter. Plus, the markets are worried about the neverending eurozone crisis and its latest phase, the apparent collapse of Spain's financial system.
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A construction worker cuts a piece of wood on the top of a home under construction at a new housing development in Petaluma, California. New homes sales have picked up, but in California, economists argue we still lack supply.
The Commerce Department released data on sales for new homes in the U.S. today. And the news is good — for the most part. We saw national sales at their highest level in two years, along with a nice bump the sales from April, up 7.6 percent.
What's driving this is tight supply and low mortgage rates, plain and simple. As Bloomberg reports, the number of houses on the market is at "record lows." However, fewer houses for sale are languishing in foreclosure and short sales (that's when the lender agrees to take a sale price for the house that's less than the total amount owed on the mortgage), and that's helping prices to get some much-needed support.
My feeling is that the news on prices is better than the news on sales — even news on sales of new homes, which implies some life in the beleaguered building trades and construction industries. We need to see a return to reliably, if modestly, ascending prices to achieve two things: get people who are currently underwater on their mortgages — but not by much — and current on payments back to even; and to re-establish the ability of borrowers to build equity in their homes so that first-time buyers can become first-time sellers and then second-time buyers.