Implications: After four consecutive months of declines, existing home sales held steady in August, ending the downward momentum. Sales of previously-owned homes were unchanged at a 5.34 million annual rate in August and are now down 1.5% from a year ago, the sixth consecutive month of year-over-year sales declines. The biggest problem for existing home sales has been a lack of supply. The months' supply of existing homes – how long it would take to sell the current inventory at the most recent sales pace – was 4.3 months in August and has been below 5.0 since late 2015 - the level the National Association of Realtors (NAR) considers tight. That said, inventories look like they may finally be turning a corner, rising on a year-over-year basis for the first time in 38 months. If sellers really are changing their behavior, a reversal in the steady decline of listings we've seen since mid-2015 would be a welcome reprieve for buyers, boosting supply and sales, as well. Even with the current lack of choices, demand for existing homes has remained remarkably strong, with 52% of homes sold in August remaining on the market for less than a month. Higher demand and a shift in the "mix" of homes sold toward more expensive properties has also driven up the median sales price, which has now risen on a year-over-year basis for 78 consecutive months. Although some analysts will suggest weakness in existing home sales is the result of rising mortgage rates, we doubt that's the case: new home sales, which would be similarly impacted by higher financing costs, have continued to rise at a healthy pace. Keep in mind that starting next month Hurricane Florence will likely hold back sales just like Harvey and Irma did last year. Look for a rebound in sales after the initial negative effects work their way through the data. On the manufacturing front this morning, the Philly Fed Index, a measure of East Coast factory sentiment, jumped to +22.9 in September from +11.9 in August, signaling growing optimism from manufacturers. Finally, in employment news, initial jobless claims fell 3,000 last week to 201,000, the lowest reading since November 1969. Meanwhile, continuing claims fell 55,000 to 1.65 million, also marking a multi-decade low. Hurricane Florence will likely push these numbers higher in the weeks ahead, among the many data readings that may be distorted in coming months. But remember that shifts in activity due to storms are temporary, and we have little doubt the Kevlar Economy will continue higher in the quarters to come.
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