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Optimistic Forecast For New Home Sales
NAHB Predicts Momentum Will Continue

Sales of new homes have been on the upswing for a few years now, and the National Association of Homebuilders believes the momentum will keep building for some time.

New home sales have been steadily increasing since 2012, a trend the National Association of Home Builders expects will continue through the rest of 2015 and into the following year.

And recent data seem to suggest the NAHB is right. It's not so much the month-to-month figures as it is the year-to-year stats that have the builders' organization in an optimistic mood.

For example, sales of newly built single-family homes were down 6.8 percent in June, compared to May, but are 18 percent above sales from a year ago.

The National Association of Realtors' Pending Home Sales Index for June shows a monthly decline of 1.8 percent in pending sales of existing homes. But it is up 8.2 percent compared to June 2014, the tenth straight year-to-year gain.

Plus, the economy continues to get stronger, and that should spur more people to buy homes. In the second quarter of 2015, real gross domestic product gained 2.3 percent, a substantial improvement over the first quarter's 0.6 percent hike.

Moreover, the second-quarter NAHB Remodeling Index reached a level of 59 in June. Anything above 50 means increased remodeling activity, while numbers below 50 point to the opposite. The RMI has been above 50 for nine consecutive quarters.

Also, the number of household formations, or independent households that rent or own, has been growing. In the second quarter, there were 117.3 million households in this category, a year-to-year gain of 1.6 million.

"Growth in household formations should improve demand for both owner and renter housing," the NAHB said in a news release. At the same time, the homeownership rate is 63.4 percent and has dropped. This compares to 64.7 percent in the second quarter of 2014, and 63.7 percent in the first quarter of this year. So it is trending downward.

But the National Association of Homebuilders believes GDP growth will be even stronger in the third and fourth quarters, and that should help drive the rate of homeownership up.

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September 18, 2019, 7:48 am PDT

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