New vs Existing Home Sales GAP

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National Association of Realtors (NAR) reported that distressed properties accounted for one-third of all sales in May. Distressed sales include REO sales (foreclosure resales) and short sales, and based on the 4.77 million existing home sales (SAAR) that puts distressed sales at about a 1.6 million annual rate in April.

All this distressed sales activity has created a gap between new and existing sales.

I believe this gap was caused by distressed sales - in many areas home builders cannot compete with REO sales, and this has pushed down new home sales while keeping existing home sales activity elevated.