A jump in new home sales last month has some analysts breathing a little bit easier, though a sharp downward revision to May and the many headwinds that remain in the new home market suggest a recovery is not yet at hand.
New home sales bounced from a record low of 267,000 annualized units in May to 330,000 in June, beating most estimates. Following a near freefall after the expiration of the tax credit in April, the rise is an indication that that market may be starting to stabilize, which is welcome news for builders.
The sale of new homes benefitted tremendously from the extra cash the government gave buyers who signed contracts by April 30; however, many model homes resembled ghost towns in May because numerous buyers moved up purchases.
There has been plenty of volatility in the wake of the expiration of the tax credit, and the solid rise in June indicates buyers are starting to test the waters.
Still, sales are very low by historical standards and builder sentiment has taken a beating. Until foreclosures begin to subside, potential buyers no longer believe prices could decline, consumer confidence picks up and significant job creation begins, stability may be the best we can hope for in the near-term.
Tuesday, July 27, 2010
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