New home sales jump in June to exceed record-low expectations
New home sales exceeded gloomy forecasts in June, rebounding from a record low in May. But because new home sales fell so low after the home buyer tax credit expired last spring, June’s numbers were still the second lowest on record. Some believe that the worst of the post-tax-credit slump is over. Others think that increasing foreclosures and the stubbornly high U.S. unemployment rate offset the positive news.
New home sales beat forecast, but that’s not saying much
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 the pace of new home sales in June was still the second lowest since records started being kept in 1963. However, the percentage increase was the largest increase since May 1980, and partially offset the historic 36.7 percent decline in May. Even so, economists expect a weak U.S. housing market to be a drag on U.S. economic recovery for much of the 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 a serving as a stabilizer for the U.S. housing industry that triggered the worst recession since the 1930s. 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 continuing to fall. The median price for new home sales decreased 0.6 percent from June 2009 to $213,400.
U.S. housing market continues to drag on economic recovery
New homes sales made up about 7 percent of the U.S. housing market last year. Taragana.com reports that number is down from a portion of about 15 percent before the housing crisis. Weak new home sales mean there are fewer jobs in the construction industry, which has historically driven economic recoveries. Each new home built creates, on average, three 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 is felt across multiple industries.