Is an Economic Recovery Possible Without Increased US New Home Sales?

June 27, 2012 / Russell Legato, Residential Property Analyst

US new home sales indicate some economic recovery is taking place. People purchased new homes faster than they have in the past two years in May of 2012. The rate of increase was 7.6 percent higher than April’s rate. April was the final month when buyers could get a federal tax credit on home purchases. Any increase is welcome, but, the rate is only half of what economists call a healthy one. A fully healthy rate is 700,000 according to them.

Is an Economic Recovery Possible Without Increased US New Home Sales?

This number is the closest to optimal that has been seen in the real estate industry in in the last five years.

Coupled with the still bargain basement level mortgage rates, the sales encourage builders to do more new construction. Add to that the rate of sales for existing homes, which have increased, and you have the basis for a housing and economic recovery in the real estate industry as well as the rest of the economy.

Every new house equals the average of three jobs for one year. The National Association of Home Builders reports each home adding $90,000 to the tax revenue. Two parts of the nation saw a radical increase in sales. In the South it was 12.7 percent and the Northeast had a whopping 36.7 percent rise. The average price was down 0.6 percent as compared to April. However, it was 5.6 percent higher than May of 2011.

The job market is still slower than it should be. This may be detrimental to the industry on the whole. Another concern is that, although sales rose 9.6 percent compared to May of 2011, they fell to a rate of 4.55 million (with seasonal adjustment). This follows the promising two year increase in April, which was 9.6 percent higher than in April of 2011.

There are major concerns about economic recovery when it comes to the job market. In April and May the number of jobs added was an average of 73,000 for the two months. It is considerably lower than it was in January, February and March, when the average number was 226,000.

The statistics are all rising, which speaks well for recovery. However, they are not rising as quickly as the economists expected.

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