The most recent reports confirm that sales of both new and existing home have clearly bottomed out. Inventories are shrinking. Housing starts are up, and prices are stabilizing.
Existing Homes – Sales of existing homes bottomed last November, and have risen 7.2% in July to an annualized pace of 5.24 million, much higher than an expected rate of 5.00 million and the biggest monthly gain since 1999.
Moreover, sales were up 5.0% on the year in their first yearly increase since November 2005. The majority of sales were either first-time buyers or distressed situations. Inventories have slightly increased to 9.4 month-supply.
New Homes – Sales of new homes have increased for the fourth straight month, up 9.6% in July to an annual rate of 433,000, following an upwardly revised pace of 395,000 in June.
New home sales hit bottom this January, and the good news is that inventories have been steadily declining since April. Inventory now stands at a 7.5 month supply.
Housing Starts – Since February, starts of single-family homes are up 32% through June, the largest four-month rise in 18 years. In July starts continued on an upward path, as single-family housing starts climbed 1.7% to a rate of 490k – its highest level since October 2008.
Builders have steeply slashed their construction of single-family homes so far below their sales levels that inventories are continuing to fall even though they have begun to build more homes.
Homebuilders will continue to face stiff competition from the existing home market, as buyers are lured by the deeply discounted prices of distressed properties.
While the housing industry continues to walk a tightrope, supply and demand are beginning to balance with the help of stable interest rates.
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