Recent Updates
- Flash PMIs: Japan, France, Germany, Euro Area, UK (May)
- Sudan: Trade (Mar)
- South Africa: Leading Indicators (Mar)
- Hungary: Employment of Fostered Workers (Mar)
- Denmark: Central Government Finance (Apr)
- more updates...
Economy in Brief
Chicago Fed National Activity Index Improves in April
The Chicago Fed National Activity Index (CFNAI) rose to 0.47 during April...
IFO Registers Small Rebound on the Month
Germany's IFO index has rebounded on the month...
FIBER: Industrial Commodity Prices Continue to Decline
Despite the recent improvement in U.S. factory output, many industrial commodity prices have weakened...
U.K. Consumer Sentiment Hits Lowest Reading since 1996
Of these 13 readings eight of them declined on the month in May three of them improved and two of them were unchanged...
U.S. Existing Home Sales Continue to Fall in April as Houses Become Less Affordable
The combination of soaring home prices across the nation and rising interest rates is making homes less affordable...
Viewpoints
Commentaries are the opinions of the author and do not reflect the views of Haver Analytics.
Profits & Margins Plunge In Q1: Expect More Margin Contraction As Fed Squeezes Inflation
The Many Links of Inflation Cycle: Hard Landing Is Needed to Crack Them
Peak Inflation and Fed Policy: A Relationship which Should Worry the Fed and Scare Investors
Why Have the Yields on TIPS Been Negative in the Past Two Years?
by Bob Brusca Existing Home Sales S(t)ink May 25, 2007
Existing home sales sank, offsetting their spurt from earlier in the year. But unlike in the new home sales report, existing home prices are much firmer with median prices off by just 0.8% Yr/Yr not off by 10%.
Price is always a double check on the degree of stress in the industry. And when it comes to existing home sales there is no intrinsic growth rate for the sector that we are looking to achieve with price cuts or any other incentives. Existing home sales do not expand the housing stock; they simply transfer ownership within the existing population. New homes and housing starts contribute to GDP. Starts and construction spending are the direct contributors while new home sales transfer built homes (or to-be-built homes) out of inventory into final sales. For now it is housing starts and new home sales that are strong. Housing permits and existing sales are weak.
Since builders are in the business of building they must make sales to survive. Existing home sales are another matter. Some sellers are testing the waters. Some will sell if they get an unrealistically good price and some are truly motivated and need to sell within some fixed time frame. For these reasons it is hard to gauge what the weakness in existing home sales really means.
It could be the failure of homeowners to cut prices as builders have. It could also be that if you smooth out the early fluctuations you find that nothing really has changed. There is no real acceleration in weakness.
If we combine new and existing home sales and plot them against the Mortgage Bankers purchase applications index, we find that the applications index is swinging up while the sales index has some volatility and looks to be leaning down. But if we use the 3-Mo moving average of home sales the two series give us signals that are much more similar and much more stable (see second chart).
On balance, housing is still quite fickle and its trends are hard to pin down. But the sectors we care about most are the strongest: new home sales and starts. We have already argued that permits weakness is flawed since the permits-to-sales ratio had grown way out of proportion. The current weakness in existing home sales is similarly dispatched but with a moving average that removes the 2007 peak as well as the recent weakness. Once that is done we see the index for mortgage applications to purchase is moving higher - an important gauge since applications cost money. Existing home prices are still stable, showing little erosion. New home prices were cut deeply but that helped to move product. On balance, the housing market seems to be functioning well. It is neither strong nor weak and still has its stresses. It is muddling.
and that is an improvement!
(Existing Home Sales: In Thousands -- National Association of Realtors) | |||||
Month | Total | North-East | Mid-West | South | West |
Apr.07 | 5,990 | 1040 | 1380 | 2380 | 1190 |
Mar.07 | 6,150 | 1140 | 1390 | 2410 | 1210 |
Feb.07 | 6,680 | 1220 | 1560 | 2570 | 1320 |
Jan.07 | 6,440 | 1060 | 1520 | 2540 | 1320 |
Dec.06 | 6,270 | 1070 | 1460 | 2490 | 1250 |
Nov.06 | 6,250 | 1080 | 1420 | 2470 | 1280 |
Oct.06 | 6,270 | 1030 | 1420 | 2520 | 1300 |
Sep.06 | 6,230 | 1040 | 1420 | 2520 | 1260 |
Aug.06 | 6,310 | 1060 | 1430 | 2520 | 1290 |
Jul.06 | 6,320 | 1050 | 1430 | 2530 | 1320 |
Jun.06 | 6,490 | 1090 | 1490 | 2550 | 1360 |
May.06 | 6,680 | 1140 | 1510 | 2610 | 1410 |
Apr.06 | 6,710 | 1140 | 1560 | 2610 | 1410 |
Percent Changes: Existing Home Sales | |||||
Mo/Mo% | Total | North-East | Mid-West | South | West |
Apr.07 | -2.6% | -8.8% | -0.7% | -1.2% | -1.7% |
Mar.07 | -7.9% | -6.6% | -10.9% | -6.2% | -8.3% |
Feb.07 | 3.7% | 15.1% | 2.6% | 1.2% | 0.0% |
Jan.07 | 2.7% | -0.9% | 4.1% | 2.0% | 5.6% |
3-Mo:ar | -28.0% | -7.5% | -36.8% | -25.2% | -39.4% |
6-mo:ar | -8.9% | 1.9% | -5.6% | -11.1% | -16.9% |
1-Year | -10.7% | -8.8% | -11.5% | -8.8% | -15.6% |
Prices: | Median Prices | ||||
One Mo: | 1.6% | 0.0% | 3.5% | 0.7% | 1.0% |
One Year: | -0.8% | -5.8% | 1.9% | -0.3% | -2.1% |