New Homes Sales Up - Prices Down

The Commerce Department reportedtoday that new home sales rose sharply to the second highest level in recent history. They also reported that the median home prices dropped over 6.5%. The median is the point at which half the homes are sold for less and half for more. What does this mean? Well given the massive number of new homes in the pipe line by home builders, prices of new homes will continue to decline. Since mortgage rates are at an all time low this indicates supply of new homes is exceeding demand, thus dropping prices. The median price of existing homes stayed at roughly $207,000. Expect continued drops in new home prices and the stock of new home builders should decline.