Sales of both new and existing U.S. homes rose in July, giving market leaders hope that the “bottom” of the housing slump may have finally passed.

New single-family home sales increased by 2.4 percent in July, according to the Commerce Department, to a seasonally adjusted annual rate of 515,000, while inventory of new homes on the market shrank to 416,000 units.
 
“We are cautiously optimistic that home sales are approaching a bottom,” said NAHB Chief Economist David Seiders, “and that the newly enacted first-time home buyer tax credit (which went into effect as part of the housing stimulus bill on July 30) will help stimulate sales and provide crucial support for a market turnaround.”

New home sales increased by 39 percent in the Northeast and by 9.9 percent in the West, but decreased by 8.2 percent in the Midwest and 2.5 percent in the South.

Meanwhile, existing homes, which include single-family, townhomes, condominiums and co-ops, jumped up by 3.1 percent to a seasonally adjusted annual rate of 5.00 million units, the highest level in five months, according to the National Association of Realtors.

Regionally, existing home sales rose in the West by 9.7 percent, 5.9 percent in the Northeast, 0.9 percent in the Midwest, and fell in the South by 0.5 percent.

And recent federal legislation should also help existing home sales continue upward, said NAR President Richard F. Gaylord. “We hope the new tools in the hands of home buyers from the recently enacted housing stimulus package will spark a sustained sales uptrend in the months ahead,” he said.

The stimulus package enabled the Federal Housing Administration (FHA) to back larger loans, up $428,750, a 37 percent increase from its former cap, enabling mortgage borrowers to obtain lower risk home loans in pricier real estate areas like Florida and California. FHA loans are safer investments for lenders because mortgage borrowers receive home loan insurance through the federal government.

With greater accessibility of FHA money, Gaylord advised, “Buyers who’ve been on the sidelines should take a closer look at what’s available to them now in terms of financing and incentives.”