Earlier I posted a graph that shows the “distressing gap” between new and existing home sales. I’ve argued that this gap has been mostly caused by distressed sales (foreclosures and short sales) and that eventually the gap would close.
Another way to look at this is a ratio of existing to new home sales.
This ratio was fairly stable from 1994 through 2006, and then the flood of distressed sales kept the number of existing home sales elevated and depressed new home sales. (Note: This ratio was fairly stable back to the early ’70s, but I only have annual data for the earlier years).
Click on graph for larger image.
In general the ratio has been trending down, although it increased over the last few months with the recent pickup in existing home sales. I expect this ratio to trend down over the next several years as the number of distressed sales declines and new home sales increase.
Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.
Earlier:
• New Home Sales at 377,000 SAAR in November
• New Home Sales graphs