New Home Sales Up in July

Is the housing market all bad news? You can barely climb out of bed these days without hearing some more bad news about the housing market and the mortgage industry: Home values are declining, home sales are down both for new homes and existing homes, and it is getting increasingly difficult to obtain affordable financing.

But not all real estate news is bad. There are several bits of good news today – even though overall news is a mixed bag. Consider these news headlines within the past 24 hours:

New Home Sales Rise in July

Today, the U.S. Commerce Department announced that sales of new homes rose 2.8 percent in July to a seasonally-adjusted annual rate of 870,000. Economists had predicted earlier this week that sales would drop 10,000 units in July to 825,000 from June’s seasonally-adjusted total of 835,000 sales.

New home sales dropped 4 percent in June from May.

Today’s news of an increase in new home sales in July is surprising in that it comes on the heels of bad news in the mortgage industry, where lenders have tightened credit standards in the wake of the collapse of the sub-prime mortgage industry.  Credit problems have intensified in August, making it more difficult for many would-be home buyers to obtain financing.

Sales sharply higher out West

Home sales in the West, which have dropped sharply during 2007, increased the most of any region in the country, a robust 22.4 percent improvement from June to July. Sales went up a modest 0.6 percent in the South. Not all regions gained however. While sales slipped 0.9 percent in the Midwest, they were down sharply in the Northeast, a 24.3 percent decline.

Although July’s up-tick in home sales provided a respite from the gloomy overall picture, it did little to reverse the national year- to-date home sales numbers, which are still down 10.2 percent compared to last year. But many builders are offering hefty incentives to entice buyers, such as paying closing costs, arranging for financing at preferred rates or including free upgrades.

Median home price up slightly in July

The Commerce Department report also noted that the median home price nationally in July was $239,500, an increase of 0.6 percent from last year. (The median is the point where half of all sales are more and half are less.) The average home price fell, however, to $300,800, a drop of 3.4 percent from July 2006.

Stock market recovering

Combined, the housing slump and the credit crunch have caused the Stock Market to fluctuate wildly over the past few weeks, although the Dow Jones Industrial average has recovered by more than 3 percent from its four-month low last week.

Mortgage rates drop to three-month low

In addition — and in defiance of the bad news related to credit — mortgage rates dropped for the latest reporting period to a three-month low, the Associated Press reported today. Rates on 30-year fixed-rate mortgages averaged 6.52 percent nationwide last week, the lowest rate since the end of May. Rates on 15-year fixed-rate mortgages averaged 6.18 percent, while five-year adjustable-rate mortgages (ARMs) averaged 6.34 percent and one-year ARMs were at 5.60 percent.

Analysts warn that a few nuggets of good news don’t necessarily translate into a suddenly rosy housing picture, but given the spate of recent bad news, we’ll take any good news as a sign that things will hopefully continue to improve and that the worst is behind us.

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