Trouble For House Market In the USA – Again

We have seen house prices rebound in the UK from the lows in 2008, however real estate in America is mostly still in deep trouble, as the latest figures for new home sales shows.

According to figures released today, sales in May of new homes in the USA fell to their lowest level since 1963. Sales figures for April were also revised downwards.

The major cause of this sales slump stems from the expiration of a government subsidy for home buyers which gave an $8000 tax credit for buyers committing to buy a new home by the end of April.

Predictably house sales were boosted prior to April as buyers scrambled to make their home purchase eligible for this government hand out. Just as predictable was the slump that followed the end of this stimulus.

However, the fall in the number of new homes sold in May was steeper than expected as the high unemployment rates in the USA make buying new homes difficult. The poor sales figures also point to the fact that America remains in a deep recession and prospects for an economic recovery have now been dented somewhat.

Does the sale of new homes in America matter to us in the UK?

Yes and No. Don’t forget that it was a crash in house prices and subsequent deluge of mortgage defaults in the USA that triggered the credit crunch and all the bank difficulties. Sadly, where the USA leads, the UK follows.

If unemployment continues to increase in the UK, and over tightening of the economy does send us towards a double dip recession, then we might also see plummeting home sales in the UK too.

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