Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update highlights new home sales, delinquencies and foreclosures.
- New homes sales followed the trend set by existing home sales last week, easing 0.7% from June, but jumping 6.8% relative to last year. The prior two month’s sales figures were revised lower, but the months supply of new homes held steady at 6.6 months and is much better than last July’s 9.0 months. The median home price for new homes fell a sharp 6.8% from a month earlier, but is up 4.7% from July of last year. This year’s strength in prices likely reflects a tighter stock and larger homes selling than last year when the $8,000 Federal tax credit drew in many first-time buyers.
- The Mortgage Bankers’ Association released figures yesterday on delinquencies and foreclosures in the 2nd quarter. The report suggested near term improvements with troubles on the horizon. Foreclosures started rose for the 2nd consecutive quarter as banks continued to catch up after the fall’s moratorium, while the foreclosure inventory and 90-day delinquency rates eased. However, the 30-day delinquency rate is up for the 2nd consecutive quarter, suggesting that the soft economy and labor markets had an impact on some owners and that the 90-day delinquency rate and foreclosure rate are likely to rise in the future. About 30 percent of all home sales will be distressed over the next 2 years. This is a necessary clearing processes from the residual impact of past lending mistakes.
- New homes sales eased slightly in July, but remain strong. However, they will remain constrained as long as there is a large overhang of foreclosed and short-sale properties as well as a low inventory of new homes for sale. The slack economy continues to weigh on consumers and will likely show up in the form of higher delinquencies in the near future at the 60 and 90-day levels as well as upward pressure on foreclosure starts. Sales of new and existing homes are stronger than a year ago, but are struggling with the already swollen levels of distressed sales. More needs to be done to create jobs and to aid the liquidation of the inventory of distressed properties.