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New Home Sales VS Existing Home Sales

By
Mortgage and Lending with www.JakePlanton.com 209327

Things are not as rosy as well think...

[N]ew home sales are far more important for employment and the economy than existing home sales. When an existing home is sold, the housing stock doesn't change, and the only direct contribution to the economy are the transaction costs. When a new home is sold, the housing stock of the nation increases, and there is a significant amount of spending on material and labor.

During the housing bust, new home sales fell much further than existing home sales (as a percent of sales). I've jokingly referred to the difference in percentage declines as the "Distressing" gap, because of all the distressed sales of existing homes.

His bottom line:

The ratio could decline because of an increase in new home sales, or a decrease in existing home sales - I expect a combination of both.

 

 

Comments (2)

Joel Prince
The Principle Group, Inc - Hixson, TN
Hixson/Soddy Real Estate Broker

Jake -

Good post.  Liked the graph too.  The "Distressing Gap" is indeed distressing.

Oct 29, 2009 06:05 AM
Jake Planton
www.JakePlanton.com - Portland, OR

Yea, scary.  Just was watching CNBC, and Diana Olick was talking about this.  She says that the builders are not building, so that gap could be an issue...also, there could be a problem with low inventory of lower priced homes in the near future...crazy...

Oct 29, 2009 06:09 AM