New home sales have averaged 362,000 on an annual rate basis through August. That means sales are on pace to increase 18% from last year (and based on the last few months, sales will probably increase more than 20% this year).



Here is a table showing sales and the change from the previous year since the peak in 2005:





Year New Home Sales (000s) Change 2005 1,283 2006 1,051 -18% 2007 776 -26% 2008 485 -38% 2009 375 -23% 2010 323 -14% 2011 306 -5% 20121 362 18% 12012 pace through July.

Click on graph for larger image.

But even with a 20%+ increase this year, 2012 will be the 3rd lowest year since the Census Bureau started tracking new home sales in 1963. This year will be above 2010 and 2011, and it is possible - with a fairly strong last four months - that sales will be close to the level in 2009.Given the current low level of sales, and current market conditions (supply and demand), sales will probably continue to increase over the next few years. I don't expect sales to increase to 2005 levels, but something close to 800,000 is possible once the number of distressed sales declines to more normal levels.Here is an update to the distressing gap graph.This "distressing gap" graph that shows existing home sales (left axis) and new home sales (right axis) through August. This graph starts in 1994, but the relationship has been fairly steady back to the '60s.Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales. The flood of distressed sales has kept existing home sales elevated, and depressed new home sales since builders haven't been able to compete with the low prices of all the foreclosed properties.I don't expect much of an increase in existing home sales (distressed sales will slowly decline and be offset by more conventional sales). But I do expect this gap to close - mostly from an increase in new home sales.Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.Earlier: