Implications: Existing home sales moved higher in April, rising to a three-month high and beating consensus expectations. Sales of previously owned homes rose 1.7% in April to a 5.45 million annual rate, and are up 6% from a year ago. This is encouraging, and we think the broader trend will continue to be upward, but there are still some headwinds. Tight supply and rising prices continue to be the main factors holding back sales. While inventories rose 9.2%, or 18,000 units in April they are still down 3.6% from a year ago. The months' supply of existing homes – how long it would take to sell the current inventory at the most recent selling pace – is only 4.7 months. According to the National Association of Realtors®, anything less than 5.0 months is considered tight supply. The good news is that demand was so strong in April that properties typically only stayed on the market for 39 days, the shortest duration since June 2015. In fact, 45% of properties in April sold in less than a month, pointing to further interest from buyers in the months ahead. The median price for an existing home is up 6.3% versus a year ago, marking the 50th consecutive month of year-over-year price gains. While this may be pricing some lower-end buyers out of the market, it should help alleviate some of the supply constraints as "on the fence" sellers take advantage of higher prices and trade-up to a new home, bringing more existing properties onto the market. In other recent news, the Philadelphia Fed index, a measure of sentiment among East Coast manufacturers, came in at -1.8 in May versus -1.6 in April. More broadly, new claims for unemployment benefits declined 16,000 last week to 278,000, marking 63 consecutive weeks below 300,000, the longest stretch in more than forty years. Continuing claims declined 13,000 to 2.15 million. These figures are consistent with a payroll increase of about 200,000 in May, which should help boost the odds of the Fed raising rates in June.
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