Implications: Sales of existing homes plunged in July, with sales of single-family homes falling to their lowest levels since 1995. Unlike the consensus which anticipated a selling pace of 4.65 million, we expected a selling pace below 4 million precisely because the home buyer tax credit ended in June. Who would not move their home purchase up into May or June in order to receive an $8,000 check? For the same reason the August pace of sales will be weak as well. After August, we believe existing home sales will start to move back up to the underlying trend of about 5.5 million units annually.
The increase in the months' supply of homes hit 12.5, its highest level ever, but this can almost all be attributed to the extremely slow selling pace. Home inventories typically increase in July and what we saw today is actually a smaller increase in inventories than what is usual for July. In fact, inventories have dropped 2.0% over the past year. We believe home prices already reflect the impact of these now vacant homes. Prices for existing homes in July were up 0.7% from a year ago.
In other news this morning, the Richmond Fed index, a measure of manufacturing in the mid-Atlantic, came in at +11 in August. That's a decline versus +16 in July but was higher than the consensus anticipated and suggests continued healthy growth in the factory sector.
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Posted on Tuesday, August 24, 2010 @ 12:56 PM
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