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Economy in Brief

U.S. Existing Home Sales Rise As Home Affordability Increases
by Tom Moeller May 27, 2009

Both home sales and home prices rose slightly last month, according to the National Association of Realtors. The overriding message, however, was that lower prices can spur sales. Sales of existing homes rose 2.9% last month to 4.68M (AR), recovering most of the 3.4% March decline. Consensus expectations had been for April sales of 4.66M homes. Total sales include sales of condos and co-ops. In each of the country's regions sales during February roughly recovered their January declines.

The price part of the story was provided by the indication that although home prices rose all of 0.2% during April, they were down 15.4% y/y. Moreover, home prices were down by one-quarter from the 2007 peak. These declines in home prices and lower interest rates have gone a long way to increase the affordability of an existing home which is up roughly one-quarter from one year ago and by more than one-half from 2007. The measure fell slightly in the latest two months and the series dates back to 1971.

Sales of existing single-family homes alone also reversed most of the March decline with a 2.5% m/m increase to 4.180M units. However, sales remained near the lowest level since July 1997 as they have been essentially flat for the last six months. (These data have a longer history than the total series).

The number of unsold homes (condos & single-family) on the market increased a sharp 8.8% last month but year-to-year inventories are down 12.8%. At the current sales rate there was a 10.2 months' supply on the market which was near the lowest since 2007. For single-family homes the inventory rose a sharp 9.2% during April but it remained low versus last year's high. At the current sales rate there was a 9.6 month's supply, near the lowest since 2007.

The data on existing home sales, prices and affordability can be found in Haver's USECON database. The regional price, affordability and inventory data is available in the REALTOR database.

The Impact of Inflation and Unemployment on Subjective Personal and Country Evaluations from the Federal Reserve Bank of St. Louis can be found here.

Existing Home Sales (Thous) April March April y/y % April '08 2008 2007 2006
Total 4,570 4,710 -7.1 4,920 4,893 5,674 6,516
  Northeast 770 690 -10.5 860 845 1,010 1,093
  Midwest 1,000 1,020 -9.9 1,110 1,130 1,331 1,494
  South 1,740 1,710 -8.9 1,910 1,860 2,243 2,577
  West 1,170 1,130 19.4 980 1,064 1,095 1,357
Single-Family 4,180 4,080 -2.8 4,300 4,341 4,960 5,712
Median Price, Total, $ 170,200 169,900 -15.4 201,300 197,250 216,633 222,042
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