Implications: Existing home sales beat consensus expectations for the third month in a row in April, rising 7.6% to a level 22.8% higher than a year ago. Just like last autumn, much of the rise in April itself is due to the expiration of the homebuyer tax credit, which required homes to be under contract by the end of April and settled by the end June. As a result, we anticipate that existing home sales, which are counted at closing, will surge again over the next two months, before falling back temporarily later this summer. After that lull, sales should rise again as the underlying economy continues to gain strength. While some analysts may be concerned about the rise in inventories in April, the increase was similar to seasonal April gains in the previous few years, not a sign of massive "shadow inventories" suddenly swamping the market.
In other recent news, it was reported last week that new claims for unemployment insurance increased 25,000 to 471,000. Meanwhile, continuing claims for regular state benefits fell 40,000 to 4.63 million. Also reported last week, the Philadelphia Fed Index, a measure of manufacturing in that region, increased to +21.4 in May from +20.2 in April. To put this in perspective, the index is higher than it was during most of the late 1990s economic boom.
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Posted on Monday, May 24, 2010 @ 11:14 AM
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