Implications: Existing home sales slipped 1.9% in September, coming in almost exactly as the consensus expected. Some analysts are saying the decline signals a slowdown in the housing recovery, but these fears are way overblown. Sales in September were at the third highest level for any month since the homebuyer tax credit was about to expire in late 2009. It just so happens that the two months that beat September were July and August; so after two very strong months, sales slipped a little. As the top chart to the right shows, this kind of statistical noise is no different than what we've been experiencing since the recovery in home sales started in earnest 2010/11. Nor do we expect higher mortgage rates to undermine the recovery. Higher rates reflect expectations of faster economic growth and rising home prices will make buyers more willing to buy than back when mortgage rates were lower but buyers thought home prices might fall further. The months' supply of existing homes (how long it would take to sell the entire inventory at the current selling rate) ticked up to 5.0 in September but this is still lower than a year ago (5.4) and much lower than two years ago (8.0). In other recent economic news, new claims for unemployment insurance fell 15,000 to 358,000. Continuing claims declined 43,000 to 2.86 million. We expect the employment report for September (released tomorrow morning) to show a gain of 197,000 in nonfarm payrolls. However, given the government shutdown, October payroll gains will be more modest before returning to a trend of roughly 175,000 per month in November and beyond. On the manufacturing front, the Philly Fed index, a measure of activity in that region, slipped to a still robust +19.8 in October. The Empire State index, which covers New York, slipped to +1.5. Overall, these reports are consistent with continued plow horse economic growth.
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Posted on Monday, October 21, 2013 @ 10:30 AM
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