Implications: The housing recovery is definitely underway. Existing home sales rose 3.4% in April, and are up 10% from a year ago. The median price of an existing home is up 10.1% from a year ago, the largest yearly gain since January 2006. A big reason for this gain was fewer distressed sales and more sales of larger homes, a good sign for the economy moving forward. It still remains tough to buy a home. Despite record low mortgage rates, home buyers still face very tight credit conditions. Tight credit conditions would also explain why all-cash transactions accounted for 29 percent of purchases in April versus a traditional share of about 10 percent. Those with cash are able to take advantage of home prices that are extremely low relative to fundamentals (such as rents and replacement costs); for them, it’s a great time to buy. With credit conditions remaining tight, we don’t expect a huge increase in home sales any time soon, but the housing market is definitely on the mend. In other news today, the Richmond Fed index, which measures manufacturing activity in mid-Atlantic states, fell to +4 in May from +14 in April. The decline came in well below consensus expectations of +11.
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