Existing home sales rose 7.2% from last month to a seasonally adjusted annual rate of 5.24 million from June’s rate of 4.89 million. This was also 5.0% above the year-ago level of 4.99 million, and the consensus expectations of 5.0 million.
This is very good news. The only real weak spots I saw in the report were that inventories rose by 7.3%, so despite the increased sales rate, the months of supply remained at a very high (but off peak-level) of 9.4 months.
Median prices fell 15.1% from a year ago to $178,400. While median price is not the best metric for judging home prices (it can be easily influenced by the mix of houses), this rate of decline is roughly consistent with the Case-Schiller numbers and is not a surprise.
While some uptick in inventories is normal, this month was much more than normal. The overhang of inventories means that prices will still be under pressure for awhile. Still, this was the biggest monthly gain in new home sales since 1999.
As can be seen in the graph below (from http://www.calculatedriskblog.com/) it now appears that existing home sales are in a sustained uptrend. While existing home sales do not have that much direct influence on the economy, it is a good sign.
It is certainly welcome news for firms like Sherwin Williams (SHW) since when people move into a new (for them) house, they tend to do things like paint and redecorate. Furniture companies like La-Z-Boy (LZB) and carpet companies like Mohawk (MHK) should also benefit.
Three of the four regions saw increases on a monthly basis, and all four regions saw year-over-year gains. The West was the weakest, with sales dropping 1.7% on the month to a seasonally adjusted rate of 1.13 million. However, sales were 1.8% higher than a year ago.
The West was also the weakest on a pricing front, with the median price plunging 28.0% from a year ago to $202,300. This is not a huge surprise, since three of the four poster children for the housing problems — California, Nevada and Arizona — are located there.
The best monthly performance was in the Northeast, where sales were up 13.4% to an annualized rate of 930,000. That was 3.3% higher than a year ago, but the median price fell 15.0% over the last year.
The Midwest had the best year-over-year performance with a increase of 8.0% to a rate of 1.22 million. It was up a strong 10.9% on the month. The region also had the smallest decline in median prices, off just 5.9% from a year ago.
The South saw a monthly increase of 7.1% and was up 5.4% year over year as the median price fell 7.1% to $164,500. At an annual rate of 1.95 million, it remains by far the most important region for housing.
All in all, this is a very encouraging report. In existing home sales, we have gone beyond stabilization to an actual rebound. Granted much of the activity is still being driven by distressed sales of foreclosures and short sales, and by the first time buyer tax credit (which expires 11/30), but still I find this report very encouraging.
Next Tuesday we will get the new home sales data. If it looks anything like the used home data, people will have to revise upwards their near-term expectations for the economy. Housing, most importantly new housing, is historically the engine that pulls the economy out of a recession, and if it is picking up, the economy will be on a much sounder footing.
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