 | Existing home sales increase 7.6% in August |
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Implications: Over the past several months, the homebuyer tax credit has been the driving force behind existing home sales, both the surge in the Spring, then the Summer swoon, and now the rebound from that drop. With the government cutting checks of up to $8,000 for people to buy a home, it's hard to understand why anyone interested in buying a home would have waited to settle until just after the expiration of the credit at the end of June. The residual effects of the tax credit's expiration will keep the level of sales below normal for at least the next couple of months, but we are clearly rebounding off the July low and expect that rebound to continue until we get back up to an underlying trend of about 5.5 million annualized later this year or sometime next year. The higher pace of sales in August helped push down the months' supply of homes. Overall, inventories of unsold homes also fell slightly, but that usually happens in August each year. The median price of an existing home sold is up 0.8% from a year ago; the average price is up 2.9%. In other recent home price news, the FHFA index, a measure of prices for homes financed with conforming mortgages, declined 0.5%. In the past year, the index is down 3.3%. Some price weakness was expected given the lapse of the homebuyer tax credit. In the labor market, new claims for unemployment insurance increased 12,000 last week to 465,000. Continuing claims for regular state benefits declined 48,000 to 4.49 million.
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