Implications: Sales of existing homes fell to an eight-month low in July. The consensus expected a gain to 4.90 million units at an annual rate due to the strong showing of pending home sales over the past couple of months. Pending home sales are homes that have gone under contract to be purchased. What seems to have happened is that people have decided to cancel on their contracts. The National Association of Realtors said that cancelled contracts to buy existing homes remained at higher levels over the past two months from a more typical 9% - 10% over the past year. The spike in cancellations is probably due to a couple factors. First, stricter lending rules and low appraisals seem to be playing a large factor. Second, with the debt debate looming in July this may have spooked some people from closing on their contracts. We expect a bounce back in existing homes next month. In other news, The Philly Fed index fell to -30.7, the lowest level in over two years. The consensus expected a decline to 2.0. There are times when manufacturing surveys are more based on sentiment, and we believe with all the financial turmoil that has been happening in Europe, along with the large market losses over the last couple weeks, that this is one of those times. However, mid-month manufacturing indicators should not be completely ignored and we will be paying close attention to these along with the weekly indicators we follow to see if we see any change to our forecast. So far, other than data which measure sentiment, the economy appears to be avoiding any sharp downturn.
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