Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       

Blog Home
   Brian Wesbury
Chief Economist
X •  LinkedIn
   Bob Stein
Deputy Chief Economist
X •  LinkedIn
  Existing Home Sales Declined 1.8% in August
Posted Under: Data Watch • Home Starts • Housing
Supporting Image for Blog Post

Implications: After increasing four consecutive months, existing home sales declined 1.8% in August, falling to a 5.05 million annual rate. Home sales have been a microcosm of the Plow Horse economy. They have not boomed by any measure, but have certainly bounced off the bottom. Why haven't we seen more robust improvement? One big reason is tight credit. Despite being loaded with excess reserves from the Federal Reserve, banks are still reluctant to lend to home buyers. This is in direct contrast to the auto market, where non-bank lenders have loosened standards substantially since 2008-09 and auto sales have fully recovered. Another reason for the tepid recovery in existing home sales is a lack of inventory. After rising for seven consecutive months, inventories declined 1.7% in August. Still, inventories are 4.5% higher today than they were a year ago and more inventory should eventually help spur sales as buyers have more choices. The median price of an existing home sold is up 4.8% from a year ago and inventories are up 4.5%. In other words, recovering prices are getting more potential sellers into the market, which should lead to higher sales. An encouraging sign of continued healing in the housing market is that distressed homes (foreclosures and short sales) accounted for only 8% of August sales, down from 12% a year ago, and the lowest level since NAR started tracking distressed sales in October 2008. All-cash buyers, which averaged about 10% of total sales before the housing bust and around 30% of sales over the past few years, fell to 23% in August, the lowest level since December 2009. This means non-cash sales rose in August and may be an early sign that lenders are finally easing mortgage credit. If so, home sales could accelerate over the next year. Either way, whether existing home sales are up or down, these data should not change anyone's impression about the overall economy. Remember, existing home sales contribute almost zero to GDP. Look for better sales in the months ahead. But, unless lenders dramatically loosen standards, the increases in sales will remain tame by historical standards.

Click here for a PDF version
Posted on Monday, September 22, 2014 @ 12:30 PM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.