Thursday, June 24, 2010

Huge gap between new home, existing home sales

I found an interesting post this morning via the Calculated Risk blog – take a look at the changing ratio of new home sales (red) to existing home sales (blue) in the national market.

Home Sales Distressing Gap May 2010

Existing home sales are great since they generally enable the selling family to move on with their life, usually to buy another house.  This can even produce a domino effect, where several homes are able to change hands due to the first buyer choosing an existing home over a new home.  This is especially important when the inventory level is high, as it was over the last couple of years.  However,

New home sales are generally considered more important for driving the overall economy, as they require a greater investment in goods & services after their purchase, as well as employing multiple people to build each one.

Think about this – if 5 people move, but they’re all part of a sell-buy domino chain, you could potentially have 5 families move into “new” homes, yet only 1 new refrigerator is purchased!  On the other hand, 5 families buying newly-built homes means 5 new refrigerators, 5 washers & dryers, 5 yards landscaped, 5 homes with new window coverings, etc. etc. etc. – more money flows into the economy.

Your would like to find this ratio for the Phoenix area Realtor,

Chris Butterworth