The Commerce Department is reporting that new home sales soared in May to their highest level since the financial market crisis six years ago. That follows a report yesterday that sales of existing homes also rose sharply last month.
But even with the gains, sales of both new and existing homes are running well below what economists consider healthy. So where are we on the housing market?
Chris Low, chief economist at FTN Financial joins Here & Now’s Jeremy Hobson to discuss the housing market.
JEREMY HOBSON, HOST:
Well Robin, yesterday on the show, we spoke with the mayor of Louisville - Louisville, Kentucky. I'm saying that right - not Louisville. And we asked people for strange names or strange pronunciation of names of cities and towns.
ROBIN YOUNG, HOST:
So much fun.
HOBSON: A lot of people had some suggestions. Leah (ph) said Pierre, South Dakota. How did we forget to mention Pierre, South Dakota?
YOUNG: It's not Pierre.
HOBSON: It's not Pierre, no.
YOUNG: Right. Well, Susie (ph) in Oklahoma writes about Miami. They have - it looks like Miami but it's my Miami.
HOBSON: In Oklahoma.
YOUNG: In Oklahoma. So if you have other - we'll make a list. We'll put it at hereandnow.org 'cause they're just so much fun.
HOBSON: This is HERE AND NOW from NPR and WBUR Boston. I'm Jeremy Hobson. The Commerce Department is reporting today that new home sales soared in May to their highest level since the financial crisis six years ago - up 18.6 percent last month. That follows a report yesterday that sales of existing homes also rose sharply last month. But even with the gains, sales of both new and existing homes are running well below what economists consider healthy for the housing market. Chris Low is chief economist with FTN Financial. He's with us from New York to talk about this. Hi Chris.
CHRIS LOW: Hi Jeremy.
HOBSON: Well, how can that be that this is not a healthy real estate market even though we're seeing the highest levels of new home sales - new homes sales - in six years?
LOW: Well, because remember what happened six years ago. That was the end of the housing bubble. Home sales collapsed to levels we hadn't seen since the 1960s, and it took a really long time to get up off the bottom. It really wasn't until 2010 that we saw any signs of life in housing. And it's been a really gradual climb from there.
HOBSON: Well, and give us more on today's numbers because I noticed that we see a 54 percent surge in sales in the North East. But in the Midwest, it's just about one and a half percent.
LOW: Yeah, well, one of the things that you see in the new-home data, particularly, is that there is this huge volatility. And it's partly because we're working from really low numbers. So in the Northeast where the winter was brutal, sales fell down to just a few units per month. Now the weather's getting better. Spring is here. Builders are able to finish up those projects that were delayed. And we saw sales recover really nicely. But, you know, stepping back - sort of bigger picture - what it looks like is new-home sales anyway have shrugged off last year's interest rate increase. They are pushing up, as you pointed out, to new cycle highs.
HOBSON: But if the Midwest had such a tough recovery there - just 1.4 percent increase month over month in May - is that an indication to you of the fact that maybe there are more jobs in parts of the country like the Northeast and maybe not as many - that the job market could be driving the housing market?
LOW: The job market is probably part of it. But the bigger issue for new homes is financing and not necessarily mortgage finance but construction loan finance. On the coast, there are big companies that build houses and those corporations can get loans if they need them. In the Midwest it tends to be smaller contractors - small business people who are doing it - and they cannot get access to credit. I think that's the bigger issue.
HOBSON: Well, do you see any potential bumps ahead? - or do you see smooth sailing for the rest of the year for the housing market? What are you expecting?
LOW: I would expect that, particularly, the new home market continues to gradually improve. We've heard a really different tone from regulators who are beginning to recognize bottlenecks in credit. And they're sort of tweaking regulations. In the meantime, the interest rates are lower than they were in December. That's really important, particularly, for the existing home market. And then on top of that, consumer confidence is better. So a better mood, more affordability and easier regulation. It's a nice combination.
HOBSON: Chris - one word answer here - are we in another housing bubble?
LOW: We are not in another housing bubble.
LOW: Evaluations would have to come up a ton before that happens.
HOBSON: Chris Low is chief economist with FTO Financial, joining us from New York. Chris, thanks so much.
LOW: You're welcome. Thank you.
HOBSON: This is HERE AND NOW. Transcript provided by NPR, Copyright NPR.