existing home sales rise

[10/25/10] Existing home sales jumped 10% month-over-month (m/m) in September to an annual rate of 4.53 million units, compared to the 4.1% increase to 4.30 million units forecasted by economists surveyed by Bloomberg, and from August's downwardly revised 4.12 million units. The median existing-home price fell 2.4% from a year ago to $171,700, and was 3.3% lower m/m. The supply of homes fell by 1.9% m/m to 4.04 million units, equating to 10.7 months of supply at the current sales pace. Sales of existing homes reflect closings from contracts entered one to two months earlier.

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Existing home sales rose solidly, increasing 7.6% month-over-month (m/m) in April to an annual rate of 5.77 million units, from an upwardly revised 5.36 million units in March, and are 22.8% higher versus the same period a year ago. The National Association of Realtors (NAR) said buyers were motivated by the tax credit-which expired in April-improving consumer confidence and favorable affordability conditions. The national median existing home price was $173,100 in April, up 4% y/y, with first-time buyers accounting for 49% of purchases. The NAR added that investors accounted for 15% of the transactions in April. Existing home sales account for the majority of total home sales and the NAR expects figures in May and June to be supported by the tax credit-as existing home sales reflect closings from contracts entered one to two months earlier. Moreover, although concerns about the continuation of increasing home sales remain, the NAR said, "many buyers remain in the market even without the tax credit," as some realtors are noting that they are busy with clients who are entering the market now as a result of improved conditions, while others are welcoming a slowdown from frantic market conditions in recent months. Treasuries remain higher, but did pare some gains following the housing data and as the global equity markets have come off of the worst levels of the day.

However, some of the enthusiasm toward the report may be being tempered by the increase of 11.5% in total housing inventory to 4.04 million existing homes available for sale, which represents an 8.4 month supply at the current sales pace, up from 8.1 in March. Also, distressed home sales were 33% of total sales, and given the elevated amount of homeowners that owe more than the value of their home, expected increasing foreclosures and the addition to supply continue to pose a threat to recovery in the housing market. The Fed has noted this threat as a reason for keeping the fed funds exceptionally low for an "extended period," and Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA has the consumer discretionary rated underperform, as discussed in Schwab Sector Views: Sea Change?, due to the headwinds facing the housing sector. See more of Brad's outlook on all the major sectors at www.schwab.com/marketinsight.

[Schwab Alerts, 5/24/10]