Implications: Although existing home sales fell 5.1% in June, the sales pace beat consensus expectations for the fourth time in five months. Most of the sales decline in June can be attributed to the expiration of the new homebuyer tax credit, which simply made people buy homes earlier than they normally would have anyway. Despite this "hangover" from the expiration of the tax credit, we believe existing home sales will eventually rebound to the underlying trend of about 5.75 million units annually. The most negative part of the report was an increase in the number of homes for sale to 3.99 million from 3.89 million in May. This likely reflects foreclosed properties finally coming on the market. We believe home prices already reflect the impact of these now vacant homes. Prices for existing homes in June were up 1.0% from a year ago.
In other news this morning, the FHFA index, a measure of prices for homes financed by conforming mortgages, increased 0.5% in May (seasonally-adjusted). The index is down 1.2% from a year ago, compared to a drop of 5.8% in the year ending in May 2009. This is the third month in a row that the FHFA index has shown an increase in national housing prices. Also in other news, new claims for unemployment insurance increased 37,000 last week. Continuing claims for regular state benefits declined 223,000 to 4.49 million. Claims figures are often roiled this time of year due to seasonal shutdowns at auto plants.
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