Implications: After hitting the highest level of the year in October, existing home sales fell 6.1% in November, the weakest reading since May. Given the month-to-month volatility in existing home sales over the past several years, it's important to focus on the underlying trend, which remains upward. Overall sales are up a modest 2.1% from a year ago and the underlying trend is improving more rapidly. Distressed homes (foreclosures and short sales) now account for only 9% of sales, down from 14% a year ago, while all-cash buyers are now 25% of sales versus 32% a year ago. As a result, non-cash sales (where the buyer uses a mortgage loan) are up 12.6% since last November. So, even though tight credit continues to suppress sales, we are seeing signs of an easing in mortgage credit, which suggests overall sales will continue to climb in the year ahead. Another reason for the tepid recovery in overall existing home sales is a lack of inventory. Inventories are up a mere 2% from a year ago and down over the past four months. In the year ahead, we expect higher home prices to bring more homes on the market, which should help generate additional sales. Either way, whether existing home sales are up or down, it's important to remember these data, by themselves, should not change anyone's impression about the overall economy. Existing home sales contribute almost zero to GDP. Look for better sales in the year ahead. But, unless lenders dramatically loosen standards, the increases in sales will remain tame by historical standards.
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Posted on Monday, December 22, 2014 @ 10:45 AM
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