This graph from CalculatedRiskBlog (www.calculatedriskblog.com) shows existing home sales (left axis) and new home sales (right axis) through July, 2011.
After the housing bubble burst in 2005, new home sales fell much faster than existing home sales, giving rise to what CalculatedRiskBlog calls the distressing gap because of the flood of distressed sales, which has bouyed existing home sales, while depressing new home sales. Why? Because builders cannot build new homes as cheaply as foreclosed properties can be purchased.
The following post, titled Boomer Retirement: Headwinds for U.S. Housing Market? is also worth reading. With a little effort you can overlay the above chart with the ones in the following post. There is every indication that existing home sales will continue to fall, possibly fifty percent from this point. Why? Because as Baby Boomers are selling equities to fund their retirement, they will also be selling their homes in order to free home equity to find their retirement. They will be downsizing, moving into retirement homes, and living with their children. This will likely depress the U.S. housing market for at least the next decade. It's not a good time to be a real estate developer, builder, or agent.
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