Implications: Existing home sales rebounded sharply in November, increasing 5.6% after falling 2.2% in October. Some of the rebound may have been due to the end of the moratorium on foreclosures that probably reduced sales in October. Regardless, we believe the underlying trend will be upward over the next year, as sales continue to rebound without artificial government support. Although the data will zig and zag from month to month, we expect sales to get back to about 5.5 million units at an annualized rate. And we expect the rebound even if mortgage rates float back upward. Housing in November was more affordable than at any time in the past 40 years, and as buyers get more secure about the state of the economy, private-sector job creation accelerates, and purchasers become more confident that their homes will eventually rise in value rather than decline, they will be more willing to buy homes even if interest rates are higher. For example, mortgage rates averaged about 7.5% in the late 1990s and were not an impediment to climbing home sales. In other housing news this morning, the FHFA index, a measure of prices for homes financed with conforming mortgages, increased 0.7% in October (seasonally-adjusted), the first gain since May, although this measure of prices is still down 3.4% versus a year ago.
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