Implications: Sales of existing homes came in right as the consensus expected, falling slightly after the large increase in August. Sales have seemed to stabilize around a 4.6 to 5.0 million annual rate. The National Association of Realtors said that cancelled contracts to buy existing homes increased to 18% in September from a more typical 9% - 10% over the past year. This might have been related to hurricane storm damage but also shows that credit conditions remain tough despite low mortgage rates. No wonder all-cash transactions accounted for 30% of sales in September, versus a traditional share of 10%. While a large portion of sales came from distressed properties (such as foreclosures and short sales), this is necessary for inventories to continue to be worked off and for the housing market to ultimately recover. The inventory of existing homes is down 13% in the past year and homes available for sale this September were at the lowest level for any September since 2005. In other news this morning, the Philadelphia Fed index, a measure of manufacturing activity in that region, increased sharply to +8.7 in October from -17.5 in September. The consensus had expected -9.4. We believe the index was beaten down in prior months because of negative sentiment, not an actual drop in activity. Now, with fears of a recession starting to decline, the index is getting back to normal, reflecting industrial growth. Also this morning, new claims for unemployment insurance declined 6,000 last week to 403,000. The four-week moving average is also 403,000, versus 440,000 in May. Continuing claims for regular state benefits increased 25,000 to 3.72 million.
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Posted on Thursday, October 20, 2011 @ 11:44 AM
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