 | Existing home sales fell 1.5% in May, sales up 9.6% from a year ago |
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| Posted Under: Data Watch • Home Sales • Housing |
Implications: The housing recovery continues. Although existing home sales fell 1.5% in May, sales are still up 9.6% from a year ago. The median price of an existing home is up 7.9% from a year ago, the largest yearly gain since 2006 and the third consecutive month of year-to-year gains. Price gains were, at least in part, due to fewer distressed sales and more sales of larger homes, a good sign for the economy moving forward. It still remains tough to buy a home. Despite record low mortgage rates, home buyers still face very tight credit conditions. Tight credit conditions would also explain why all-cash transactions accounted for 28 percent of purchases in May 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 any time soon, but the housing market is definitely on the mend. In other housing news this morning, the FHFA index, a price measure for homes financed by conforming mortgages, was up 0.8% in April (seasonally-adjusted). Prices are up 2.4% in the past two months alone. This is the fastest 2-month gain anytime on record, going back to 1991, even including the housing boom! Today's news on manufacturing was not as good. The Philadelphia Fed index fell to -16.6 in June from -5.8 in May. Some view this dip as a recession sign, but the Philly Fed Index fell to -20 in August 2011 and the Plow Horse Economy's real GDP still grew at a 1.8% annual rate in that quarter, so it does not mean we're in a recession. More likely, the report reflects concerns about Europe, rather than actual changes in activity. Meanwhile, new claims for unemployment insurance dipped 2,000 last week to 387,000 while continuing claims were unchanged at 3.30 million. These figures suggest tepid payroll growth in June: 45,000 nonfarm and 55,000 private. We think some firms are waiting for the health care ruling to decide how many workers to hire.
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