Existing Home Sales are up 4.7% - How Optimistic Should We Be?

Mish Shedlock |

Existing home sales bounced this month, coming in just above the high end of Econoday Economists' Estimates

 Existing home sales bounced back very strongly in September, up 4.7 percent to nearly reverse the prior month's revised decline of 5.0 percent, a decline that now looks like an outlier. The month's annual sales rate, at 5.55 million, is just beyond Econoday's top-end forecast and the second best reading of the recovery. The year-on-year percentage gain, at plus 8.8 percent, is back where it was during the sales gains of the spring.

The gain is centered entirely in the single-family component which rose 5.3 percent to a 4.93 million rate to underscore the strength of demand. Sales of condos, which cost less, were unchanged at a 620,000 rate.

But the report's price data, in an echo of this morning's FHFA report, are on the soft side, down 2.9 percent for the median to $221,900. Year-on-year, the median is just over 6 percent, at 6.1 percent.

Prices may have to firm further to pull more homes into the market where supply is very thin, at 4.8 months vs 5.1 months in August and 5.4 months a year ago. Six months of supply is generally considered the balancing point for supply and demand. In actual numbers, there were 2.21 million existing homes up for sale in the month for a 2.6 monthly decline and a 3.1 percent year-on-year decline.

Regional sales data are remarkably even with the Northeast showing an outsized monthly gain of 8.6 percent for an 11.8 percent year-on-year rise. The Midwest is out in front in year-on-year terms, at plus 12.0 percent, with the South, which is by far the largest housing region, lagging at the back with a 5.7 percent year-on-year gain. All regions posted gains in the month.

This report, which wraps up a busy and mostly positive week for housing data, is a big plus for the housing outlook, suggesting that demand for existing homes may be catching up with demand for new homes.

Demand For New Homes

Econoday's last statement is amusing. For starters, new home sales are not all that strong, and it is new home sales that contribute most to GDP and family formations. You cannot sell what you don't start, so let's take a look at numbers from my October 20 article Housing Starts Surprise to Upside Led by Multi-Family, Permits Surprise to Downside.

Single-Family Starts

Fred Graph 1 -10-23_1.jpg

That chart add quite a bit of needed perspective on the housing "recovery."

Existing Home Sales 


Builders better be hoping that existing homes sales don't "catch up" to new home sales. And they also better be hoping that price trends in new homes don't match weakness in existing prices.

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