Are home sales on the rebound?

Well, that depends on which statistic you look at, but a review of all reports suggest that we're not out of the woods yet.

On Wednesday morning the government reported new home sales for July reached their lowest level for that month since 1982.

Forbes Magazine reported that compared with a year earlier, both the adjusted and unadjusted figures showed new home sales actually fell more than 9%.

What's even more frightening, is new home sales for the year so far have also dropped, down 32% compared with the same time period last year. Consequently, the price of the average new home sold last month down 11%.

This is tough to figure out and not everybody has the same opinion as to whether we've hit rock bottom.  You would think that low pricing, additional tax incentives and desperate banks and home-owners would stimulate sales.  It simply hasn't.  

Perhaps it doesn't have as much to do with the price of housing or tax incentives as it does with other factors, such as unemployment, the unstable banking industry or the stringent process a borrower has to go through to get a loan.  Many people are still leery of parting with their money until they see further improvement with the economy...and with one in eight homes either in foreclosure or have owners who are behind on their payments, it's difficult to see an improving economy.

Further, it doesn't help when mortgage rates are climbing again.  They are at about 5.5%, whereas a few months ago they were around 4%.  That's a pretty significant increase.  Of course, the government is trying to push the rates down again by tactical maneuvers such as buying debt, but the banks are bracing themselves for other things that are going to hit them, such as the possibility of merchants negotiating rates directly with Visa and Mastercard as opposed to having to go through the banks.  If the banks are left out of that process, they stand to lose billions of more dollars.

Like I said earlier, it depends on which numbers you look at.  Some positive numbers the Los Angeles Times reported that  housing permits rose by 4% from June to July.  Construction of single family homes rose by 7.5% and that is the third straight monthly gain. Work on town homes and apartment buildings jumped a whopping 62%...those are some encouraging numbers.  Then you look at the flip side and home starts are down 45% from this same time a year ago.  Just depends on the numbers you look at.

On another positive note, is it looks like investors are starting to have some confidence in the construction industry.  The Dow Jones U.S. Home construction Index is up 2.21%.  However, some analysts believe that the increased home construction is going to devalue homes more because of the ever-increasing amount of the inventory of surplus homes.

What we can look at is that compared to six months ago, they are improving almost across the board.

Let's keep our fingers crossed.



Peace and Success,



Kevin Halper