According to a Census Bureau report, New Home Sales in June were at a seasonally adjusted annual rate of 1.374 million vs. market expectations of 1.3 million. May sales were revised up to 1.321 million from 1.271 million. Does this tell us anything?

Many folks are talking about the housing bubble -- the arguments for and against such a situation are equally impressive. Many will point to record-breaking new home sales as a way to bust theory of a housing bubble.

I believe that monitoring the New Home Sales reports can serve as an indicator of overal economic vitality, or growth -- however it's not enough information to tell me whether there is a housing bubble or not. Lew Sichelman, of MarketWatch, wrote my favorite bubble article. Here's an extended quote from his writing:

• ... the experts don't agree on whether or not there is a bubble. For every one that says the sky will soon be falling, there is another who says there's no end in sight to the housing gravy train; that mortgage payments as a percentage of income remain relatively low.

  But most economists do suggest that the markets least likely to implode are those with solid foundations. The main statistic to follow is employment growth. In the most simplistic terms possible, jobs are filled by people who need somewhere to live.

  Other good tell-tale signs are income growth and some kind of artificial constraint on the production of new houses, i.e., the lack of land or a politically imposed building moratorium. Also pay attention to the inventory of homes on the market. If inventories grow, that means houses aren't selling as fast as they have been. And when sellers don't sell as quickly as they had anticipated and have to buck some competition, they become spooked and start cutting their asking prices.

So, keep your eye on home sales, especially in your local markets -- but don't read too much into the figures.

Thanks for reading!

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