An article in Bloomberg View talks about real estate and new home sales. In the said article it was mentioned that the New home sales were reported earlier this week are a component of gross domestic product (existing home sales are not). It was said that the second quarter GDP was revised to 3.7 percent. It was then concluded that new home sales are vital, though they make up less than 15 percent of total housing sales.
The article says that the month-to-month data is self-reported by builders Furthermore, the quarterly figures are said to be more or less accurate, but "each month comes with a high double-digit probability of statistical error". In another source, reports on new home sales "are an extremely noisy data series, with a confidence level of ±21.1%"
The prior source shared two charts that are said to be most informative. Furthermore, it was said that the Census Bureau reports new home sales so far this year at 316,000, which is not seasonally adjusted, up 21.2 percent from the same period last year. Moreover, it was also mentioned that despite record low mortgage rates, data still shows cyclical lows.
It was also said that there are reasons why new homes sales are trending so much below their historic averages. One of the reasons was attributed to that giant boom from 1998 to 2007 that created a huge oversupply of new construction which the source says "exhausted" much of the demand for new homes. Another reason pointed out to the aftermath of the financial crisis created a huge number of distressed sales -- foreclosures, short sales and owners desperate to sell and reduce debt. The effect then was losses taken by banks and homeowners acted as net discounts to buyers, acting as price competition to new construction.
Would this trend continue in the long run?
