New home sales drop, but up for the year

(MoneyWatch) COMMENTARY Though reports keep surfacing that both home prices and home sales are up month-after-month, the new construction industry isn't getting the same good news.

New home sales dropped 8.4 percent in June after two months of gains, according to U.S. Department of Commerce statistics released this week.

June's tumble marks the biggest drop in new home sales in more than a year - a stark contrast to May's numbers, which marked a two-year high for new home sales.

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Month-to-month numbers are often volatile, just like the housing market's recovery. Every time we take a step forward we seem to take a step back. Look at the overall picture and it's not all bad news: The seasonally adjusted annual rate of 350,000 new homes sold is up 15.1 percent over the June 2011 estimate of 304,000 homes sold each year. But that is just a fraction over the all-time lowest number of new homes sold, and far below what is needed for a healthy new home construction industry.

"Today's number, while lower than last month's, doesn't really pose any threat to the steady upward trend we've seen over the past 12 months," said Robert Denk, senior economist at National Association Home Builders, in an interview.

The number of homes sold annually isn't what economists consider healthy, but a healthy rate of home sales is still a long way off as we limp through challenging economic times.

New housing stock remains low at 144,000 new homes available, and that doesn't even reflect the true number of houses on the market. Of those 144,000 new homes, only 41,000 are completed and ready for move in, according to the Department of Commerce.

"Compared to the housing stock of 130 million homes, if you want to buy a brand new house and move in today, that's pretty slim pickings," Denk said.

The sluggish economic recovery, high unemployment and strict lending practices have kept the home building industry down over the past three years. The housing stock is about 35 to 40 percent of what is usually built in a year, according to Denk.

He predicts that number will pick up the second half of the year and each year after that. With the overall growth over the past year, it's quite possible. But if you don't have have a job - or a job that pays enough to make a new home payment - it's awfully tough to become a new home buyer.

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    Ilyce R. Glink is an award-winning, nationally-syndicated columnist, best-selling book author and founder of Best Money Moves, an employee benefit program that helps reduce financial stress. She also owns, where readers can find real estate and personal finance resources.