By: Dr. Mike Campbell

Recently, we reported that President Obama had declared the housing glut in the USA to be impeding the recovery in America. Statistics have just emerged about the current status of the sale of newly constructed housing stock and existing homes that suggest that the market is even more sluggish than analysts had feared.

New homes sales in the US fell sharply in July, according to official data, adding to concerns over the weakness of the US economic recovery. The figures revealed that new home sales in July had fallen by 12.4% from their level of the previous month, making the annualised rate 276 600 new home sales. This is the lowest number since records began being collected in 1963.

The situation for re-selling of the existing housing stock was also worse than anticipated, according to data collected by the National Association of Realtors. The rate of sales for July fell by 27.2% compared to the rate observed in June, making the monthly rate the worst seen in ten years. 3.83 million home sale transactions were completed in July. The slump has been partially blamed on the ending of tax credits which had been designed to boost sales as part of the fiscal stimulus package put in place by the Obama administration.

Consumer confidence is critical to the US recovery as consumer spending provides the driving force for demand of US production. However, when people are worried about job security, they tend not to spend which depresses demand. Many analysts believe that recovery within the housing sector is just as vital to the health of the US economy. Taken within the context of a stubbornly high (10%) unemployment rate and other signs of a slowdown in the US economy, the housing sector results are being viewed as an indicator of the weakness of the US recovery and an increased risk of a return to recession.