New Home Sales Test Market – US-FOREX.US
Existing home sales in June gave Wall Street hope the troubled market is on the mend. The real test will come Monday when the government reports new-home-sales figures, which don’t benefit from mortgage foreclosures.Abiel Reinhart, an economist at JPMorgan Chase, believes new home sales in June grew moderately to 350,000, in line with expectations. The housing market has recently experienced some moderately encouraging trends, like a mild increase in home building sentiment, as well as the respectable gain in new-family-home construction. “Both of these numbers suggest that at least in the single-family segment we probably reached the bottom back in January, and at this stage it’s encouraging to see either stable or slowly increasing sales,” Reinhart said.On Thursday the National Association of Realtors reported existing home sales rose 3.6% in June, from May, exceeding expectations. It was the first time the industry had experienced three straight months of gains since 2004. The housing sector responded by rallying in midday trading, as home builders such as D.R. Horton
rose 9.2%, Lennar
jumped 8.8% and KB Home
gained 8.7%. Overall, the sector rose 5.7%, as measured by the SPDR S&P Homebuilders
exchange-traded fund, while the Dow reached 9,000 for the first time since January. Last week, the U.S. Commerce Department reported that June housing starts unexpectedly rose to 582,000, the highest level since November of 2008. Building permits meanwhile rose by 8.7%, with multifamily home permits lifting 18.8% and single-family permits moving up 5.9%. At the time of the release, Reinhart noted that builders are increasing single-family permits and starts may mean that they are already seeing more gains in single-family sales.
The NAR estimated that first-time buyers accounted for 29% of existing homes sales in June. Anna Torma, home builder analyst at Soleil, said the improvement in existing home sales was due to bargain-hunting for foreclosures and the benefit of the 8,000 tax credit for first-time home buyers. Despite the good news, Torma expects that rising unemployment, increasing numbers of foreclosures and tight credit markets will continue to weigh on existing home markets.Thursday’s report on existing home sales in June follows another released Wednesday by the Federal Housing Finance Agency indicating more stability in home prices. “Other price measures, including the LoanPerformance, Case-Shiller and Radar Logic figures, have suggested that price declines are moderating, but they are not as strong as the FHFA index,” JPMorgan’s Reinhart said.