 | Existing home sales declined 4.3% in November to a 4.90 million annual rate |
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| Posted Under: Data Watch • Home Sales |
Implications: Existing home sales slipped 4.3% in November. Is this the end of the housing recovery? We do not think so for a couple reasons. Realtors have noted a lack of inventory is holding down sales. This could be leading some who would have purchased an existing home to purchase a new home instead. We also do not believe higher mortgage rates are holding back sales. Since August, when many started complaining that interest rates were going to kill housing, new home sales are up 19% in the three months since July while existing home sales are down 9.1% in the four months since July. If higher mortgage rates were hurting sales, shouldn't we see it manifest in lower sales in both the new and existing home markets? So far, we have not seen this, so there must be another reason. Existing home sales are calculated when a home closes, New homes are calculated when a home goes under contract. That means for November, most of these existing homes would have gone under contract in September and October. In October, during the government shutdown, some closings were delayed because income could not be verified by the IRS. For this reason, we expect a rebound in sales over the coming months. Existing home sales contribute almost zero GDP, so there will be no noticeable negative effect in Q4 from this temporary slowdown in sales. In other news this morning, new claims for unemployment benefits increased 10,000 last week to 379,000. Continuing claims for regular state benefits increased 94,000 to 2.88 million. Claims data are often volatile between Thanksgiving and Christmas and this year is following that pattern. Look for a large drop in claims by early in the new year. It's still early, but plugging recent data into payroll models suggests a gain of about 130,000 jobs in December, both nonfarm and private. On the manufacturing front, the Philly Fed index, a measure of factory sentiment in that region, rose to +7.0 in December from +6.5 in November. The index has remained positive for seven consecutive months, signaling continued expansion in the manufacturing sector.
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