 | Existing home sales declined 1.7% in September to an annual rate of 4.75 million units |
|
| Posted Under: Home Sales • Housing |
Implications: Although existing home sales fell slightly in September, they remain right near the highest level in over two years and there should be no doubt the housing market is in recovery. Sales are up 11% from a year ago while home prices are up 11.3%. Meanwhile, the inventory of existing homes fell to 2.32 million in September from 2.40 million in August, the lowest level since March 2005! Inventories are down 20% from a year ago and the months' supply of homes (how long it would take to sell the entire inventory at the current selling rate) fell to 5.9, the lowest level since March 2006. Just a year ago, the months' supply was 8.1. In the year ahead, higher prices and sales volumes should lure more potential sellers into the market. The rise in median prices can be attributed to a couple of factors. First, a lack of inventory while demand is picking up. Second, fewer distressed sales and more sales of larger homes. In general, it still remains tougher than normal to buy a home. Despite record low mortgage rates, home buyers face very tight credit conditions. Tight credit conditions would also explain why all-cash transactions accounted for 28 percent of purchases in September versus a traditional share of about 10 percent. Those with cash are able to take advantage of home prices that are extremely low relative to fundamentals (such as rents and replacement costs); for them, it's a great time to buy. With credit conditions remaining tight, we don't expect a huge increase in home sales anytime soon, but the housing market is definitely on the mend. In other recent news, new claims for unemployment insurance increased 46,000 last week to 388,000. The week before, claims had dropped to 342,000. The true trend is likely somewhere in between; averaging the two figures gets to 365,000 which is very close to the four-week moving average of 366,000. The Philadelphia Fed index, which measures manufacturing sentiment in that region, increased to +5.7 in October from -1.9 in September. This is the first positive reading and the highest level since April.
Click here for a PDF version.
|
|