The Census Bureau is reporting that new home sales in April rose 0.3% from last month to a seasonally adjusted annual rate of 352,000, but are still down -34% from last year.

While the new home market remains over shadowed by the existing home sales market in terms of sales and supply volume, it is worth noting that the construction of new homes does have a significant GDP associated with it.  Jobs are created, supplies and materials are purchased, and tax revenues are produced for local municipalities.  In other words, new home construction contributes to the broader GDP for our economy.

Unfortunately, as the new home market continues to deteriorate not as a result of overbuilding but as a result of the foreclosure epidemic, local municipalities and economies continue to struggle.  

While I think that most people understand that we are in a housing depression, I don't think many people know just how far off this cliff that the new home industry has fallen compared to existing home sales.  Here is a look at existing home sales (Source: NAR) compared to new home sales (Source:  Census Bureau) since 2005.

                 Existing      /       New

2005:  7.076 million / 1.283 million

2006:  6.478 million / 1.051 million

2007:  5.652 million / 0.776 million

2008:  4.913 million / 0.485 million

2009:  4.680 million / 0.356 million (April's seasonally adjusted rate)

While existing home sales have fallen approximately 34% from their peak, new home sales are off a whopping 73%.  The reason this is the case is because the foreclosure market has supplemented the new home market.  In other words, there is not the need for as many new homes because there have been millions of foreclosures coming back to the market over the past couple of years.  And what is more alarming is that Credit Suisse is predicting an additional 8 million foreclosures over the next four years.

In the absence of a real housing stimulus plan, the new home market will remain on life support for the next 3-4 years.