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New Home Sales vs. Existing Home Sales

David Lykken
Jul 28, 2015

Last week, we received some conflicting numbers in regards to how homes are selling in the market right now. First, the encouraging news is that existing home sales are up significantly for the second consecutive month. In June, sales jumped 3.2 percent over the previous month and—even more amazingly—sales increased 9.6 percent over June 2014. As a key summer month for purchasing homes, this June is certainly a big indicator that the market is well on its way to a full recovery.

On the other hand, we also received the numbers in regards to new home purchases—and this news was less encouraging. Declining 6.8 percent, new home sales hit a seven month low. Although people are purchasing more homes, new homes aren't being built. So, the question is—which number is more important? What should we be paying attention to?

Well, I'm going to take the easy way out on this one—I think they're both important. The obvious response is that the existing home sales are a better indicator, because they account for 90 percent of the market. That is certainly true. However, we must remember that all existing homes were once new homes. New home sales are, therefore, a more long-term indicator of the health of our economy. If new homes aren't being built, it could mean a worse situation later down the road.

The important thing is take all the data we can into account. Existing-home sales, new home sales, and any other piece of information we can get can help us develop better strategy to make better decisions going forward. It's never one or the other—we'll take everything we can get.



 

David Lykken is 40-year mortgage industry veteran who has been an owner operator in three mortgage banking companies and a software company. As a former business owner/operator, today David loves helping C-Level executives and business owners achieve extraordinary results via consulting, coaching and communications, with the objective of eliminating corporate dysfunction, establishing and communicating a clear corporate strategy while focusing on process improvement and operational efficiencies resulting in increased profitability. David has been a regular contributor on CNBC and Fox Business News and currently hosts a successful weekly radio program, “Lykken on Lending,” that is heard each Monday at noon (Central Standard Time) by thousands of mortgage professionals. He produces a daily one-minute video called “Today’s Mortgage Minute” that appears on hundreds of television, radio and newspaper Web sites across America. He may be reached by phone at (512) 501-2810 or by e-mail at dlykken@mbs-team.com