Figures are promising, but some factors remain weak.
There’s good news and then there’s bad news.
The Commerce Department has reported a better than expected 9.6 percent increase in sales of new homes in July compared to the previous month. That’s an estimated 433,000 sold units for the past month. The Northeast area dwarfs the others in its MoM rate at 32.4 percent increase. The South only managed to post 16.2 percent improvement in sales, while the West registered a modest 1.0 percent only. The Midwest region however failed to continue its streak since April when sales dropped to -7.6 percent.
The May 2009 Case-Shiller Home Price Index also shows an easing slowdown in home values, with 18 of the 20 cities surveyed posting signs of recovery. The 20-Composite Index had its home values dip by 17.1 percent YoY and an increase of 0.5 percent MoM. By comparing the changes in April/March and May/April, the most improved cities are Cleveland, San Francisco, Washington, Charlotte, Boston and Chicago.
Let’s analyze these minute strokes of luck. YoY results of new home sales still show no sign of huge leaps, with the change recorded at -13.4 percent for the entire country. There’s a good indication that people are getting optimistic lately; but nothing can deny that, for the month surveyed, home sales should have been brisk under normal market conditions.
Second, new home sales are obviously fueled by the $8,000-tax credit for first time buyers. But after it expires on November 30, there’s nothing that we can expect much from home sales again. Buyers will start closing weeks before the deadline to avoid all the hassles; and, during December, only a good plan to perk up buyer activity will restore the slight boost in sales.
Lastly, the minimal improvement in home values may discourage some buyers from closing some deals because they couldn’t start affording them. Take Cleveland for example. Its April/May Change was at 1.2 percent. The next month’s comparison propelled swiftly to 4.1 percent.