August New Home Sales ? What is the Effect on Current Housing Market Trends?

August new home sales were announced by the Commerce Department last week.

The August new home sales market continues to struggle because of the high inventory of houses and the lagging economy.  Housing market trends are very depressed.  This is having a devastating effect 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% higher than the lowest month in recorded history.  This lowest level was in May, 2010.  Economists had projected a 6.9% increase in August new home sales or 300,000 units.  The actual numbers obviously fell far short.

The federal government first time buyer tax credit program ended in April of this year.  May saw a sizable drop in housing sales.  This huge drop was primarily due to the rush by homebuyers to purchase homes before 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 offered.

Today’s sales of new and existing homes are being negatively affected by high unemployment, tight credit standards, and the concern about continued housing price declines.

A surging housing market has always been instrumental in driving the economy out of a recession.

The weak August new home sales numbers indicate that the housing market is far from a recovery.  This is bad news for those hoping for a near term economic recovery.

Housing market trends are going in the wrong direction.  But new homebuilders are making the situation 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 home sales of 288,000, it’s easy to see that builders are adding to the inventory of unsold homes.

 

Builders must compete with a huge inventory of foreclosed homes with many more coming onto the market.

I’ve said this before.  In order for the housing market to stabilize, housing prices must come down to a fair market value.  Government intervention is only postponing the time when the housing recovery can truly begin.  Until we see the end of this, housing market trends will remain negative.

Scott Hubbard has retired from 25 years as a Chief Financial Officer in Corporate America. He now teaches corporate professionals and network marketers how to start a successful internet marketing business.

You can go to his blog and pick up his free report, “6 Steps to 6 Figures,” on how to help baby boomers retire from corporate America.  You can reach him toll-free at 877-878-4036 or by email at Scott@BabyBoomerRetirementGuide.com.

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