 | Existing home sales rise 2.7% in January |
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Implications: The housing market continues to heal. Existing home sales grew 2.7% in January, the third increase in a row. Sales are now at the fastest pace since eight months ago, when the homebuyer tax credit expired. Also, sales of existing homes are now very close to the long-term trend of 5.5 million units annually. With housing affordability hovering at the highest level in at least 40 years, the market for homes is poised to continue improving. Incomes are rising, mortgage rates remain relatively low, and homes are cheap. Lenders are asking for large down payments, but this is no different from a year ago. In other recent housing news, the Case-Shiller index, a measure of home prices in the 20 largest metro areas around the country, declined 0.4% in December (seasonally-adjusted) and was down 2.4% in 2010. Prices have fallen six straight months, since the end of the homebuyer tax credit. However, the decline in 2010 was the smallest since prices peaked in 2006 and we expect a modest price gain in 2011. Meanwhile, manufacturing continues to soar. The Richmond Fed index, a measure of manufacturing activity in the mid-Atlantic, increased to +25 in February from +18 in January, signaling robust growth in goods production. Combined with recent good news from the Philly Fed survey, the nationwide ISM manufacturing index likely remained at a very high level in February.
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