Tuesday, August 23, 2011
Distressing Gap: The following graph shows existing home sales (left axis) and new home sales (right axis) through July. This graph starts in 1994, but the relationship has been fairly steady back to the '60s.
Then along came the housing bubble and bust, and the "distressing gap" appeared due mostly to distressed sales. The flood of distressed sales has kept existing home sales elevated, and depressed new home sales since builders can't compete with the low prices of all the foreclosed properties.