New home sales: better luck next year | Waccabuc Real Estate

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New data out this morning showed new home sales rose 0.2% to 467,000 in September. That may seem like a small number, but it’s the highest rate since July 2008. The government also revised down August’s blockbuster number from 504,000 to 466,0000.
Joe Brusuelas, Chief Economist at McGladrey is not impressed by the number. “It’s the same old, same old,” he said. “What we have is... a problem in the housing market that has to do with tight credit conditions. Even though the provision of private financial credit is up, it’s not translating to effective increase in loanable funds to people who are interested in a home.”
Still, that doesn’t mean he agrees with the administration’s new push to help people buy homes. Recently, CEO of Fannie Mae Timothy Mayopoulos said the housing giant would go back to its previous policy of buying home loans where buyers put as little as 3% down.
“I really think that they oughta re-think this 3% down idea,” said Brusuelas. He worries that this incentive will encourage people to buy homes beyond their reach and put them at risk for going under water on their homes – a big problem in the housing crisis. “Let’s hope this is just an electoral ploy… because I think this is a good example of bad policy.”
But there are more issues with the housing economy than just credit. There’s also a big tie in with jobs.

“The employment-to-population ratio of those aged 25 to 34 is lower than where it has been compared prior to the recession,” reminds Brusuelas. “Until those individuals are hired in mass numbers, and see increasing wages, you’re not going to get the demand for residential investment, which is very important to GDP.”
The unemployment rate is now below 6%, but wage growth during the recovery has been essentially stagnant.
“Typically in about 12 to 18 months you’re going to see wages rise,” but the increase will not be the 4% we’re used to – more like 2-2.5%.
The other mistake many of us try to make when understanding housing trends, said Brusuelas, is looking at housing as a national story when much of what drives the housing market up or down depends on local factors.


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http://finance.yahoo.com/news/new-home-sales-up--2--in-september-153838478.html

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