June New Home Sales Surge, But Don't Get Excited
New home sales in June jumped by the biggest percentage since December 2000, according to data released moments ago by the Commerce Department.
Sales of new homes went up 11 percent in June compared with May, to a seasonally adjusted rate of 384,000. This is the strongest rate December 2000.
That sounds like good news, if you just take it on its face. But if you dig a little deeper into the data, you get a grimmer picture.
Why have new home sales surged and prices risen for three straight months?
Because, in June, the median sale price of of a new home was $206,200, down a whopping 12 percent from $234,300 in June of last year.
This means that investors and "speculators" (a pejorative term for investors) are snapping up new homes -- many that have sat empty for months on the cheap, as mortgage rates stay low (5.55 percent).
So this is not you or me deciding, "Hey, I think the economy looks like it's getting better and I'm ready to jump into the biggest expense and obligation of my lifetime," which is what buying a home is. And which would be a true sign that the economy is improving.
Instead, it's investors saying, "Good time to buy cheap and hold onto until the market rebounds and I can resell." This is a valid and necessary component of the housing industry, but not the one that will defibrillate it back to health.
July 27, 2009; 10:44 AM ET
Categories: The Ticker | Tags: Commerce Department, home sales, new home sales
Save & Share: Previous: Markets Flat to Slightly Off at Opening
Next: Obama Waves, If Not Shakes, Economic Stick at China
Posted by: chris76543 | July 27, 2009 12:46 PM | Report abuse
Posted by: chris76543 | July 27, 2009 1:15 PM | Report abuse
Posted by: liteatnight | July 27, 2009 2:15 PM | Report abuse
The comments to this entry are closed.