In another sign the housing market is climbing back up from the historic bottom it reached early this year, sales of new homes surged 9.6 percent in July which was much greater than forecasted and it was the fourth month in a row that this trend has happened.
On Wednesday the Commerce Department reported that sales rose to a seasonally adjusted annual rate of 433,000 from an upwardly revised June rate of 395,000. Home sales are now up more than 30 percent from the bottom that was reached in January of this year, but are still off from the frenzied peak that was reached four years ago.
The median sales home price is down slightly to $210,100 from $210,400 in June and is off 11.5 percent from this time last year. However, prices are still up from March's low of around $205,000.
Since last September, July's sales pace was the strongest. Over 433,000 units were sold which exceeded the forecasts of economists nation wide of an expected a pace of 390,000 units.
Homebuyers are racing to take advantage of a federal tax credit that covers 10 percent of the home price, or up to $8,000, for first-time owners just like car buyers used the government's "Cash for Clunkers" program to stimulate the auto industry. In order for home-owners to take advantage of this tax break program the home sale must close escrow before the deadline at the end of November in order for the buyers to qualify for the credit.
The National Association of Realtors and the National Association of Home Builders are pushing Congress to have the tax credit extended and sadly, if it's not, then sales could reverse their upward trend. However, the good news is that the economy is much healthier now and so the likelihood that sales would fall back to the lows of last winter are slim even if the credit program ends in November.
As sales continue to rise, its more likely to make home-builders much more confident about getting new projects underway which will likely lead to more jobs in the construction industry.
All of these are critical elements for a sustainable economic and housing recovery.
According to the National Association of Home Builders, each newly built home creates the equivalent of three jobs lasting approximately one year and usually generates close to $90,000 in taxes that are paid to the local and federal governments.
Down more than 3 percent from this past May there were over 271,000 new homes for sale by the end of July and that sales pace represents 7.5 months of supply which is the lowest since April 2007. This means that builders have scaled back construction so that supply meets demand evenly.