Implications: Sales of existing homes rebounded sharply in August, coming in well above consensus expectations, and beating the forecast of all 74 economic groups that made predictions. What makes the 7.7% gain to a 5.03 million annual pace even more impressive is that it came in the face of financial volatility in August as well as a hurricane that hit the eastern seaboard late in the month. It would not have been surprising if these factors temporarily depressed sales, which are counted at closing. Lenders could have balked, asking for a larger down-payment or re-inspection to make sure the storm did not damage the home; buyers could have balked out of (in our view, unwarranted) concern about a double-dip recession. Despite these potential pitfalls, the strength in sales was widespread, increasing in all major regions of the country and for both single-family homes and condos/coops. While a large portion of sales came from distressed properties (such as foreclosures and short sales), this is necessary for inventories to continue to be worked off and for the housing market to ultimately recover. The inventory of existing homes is down 13.1% in the past year and homes available for sale this August were at the lowest level for any August since 2005. Despite today's good news, strict lending standards continue to making access to credit difficult, so we don't expect robust sales gains every month. In other recent news, the growth of chain store sales continues to show we are not in recession. Last week's same-store sales were up 3.4% versus a year ago according to the International Council of Shopping Centers and up 4.1% according to Redbook Research.
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