New home sales versus existing home sales

Thursday, Oct 29, 2009

This is obvious but worth stating: new home sales are far more important for employment and the economy than existing home sales. When an existing home is sold, the housing stock doesn't change, and the only direct contribution to the economy are the transaction costs. When a new home is sold, the housing stock of the nation increases, and there is a significant amount of spending on material and labor...

I believe this gap was initially caused by distressed sales, but more recently the gap has also been widened as a result of the first-time home buyer tax credit.

Calculated Risk blog, October 28, 2009,