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Econ Wrap-Up: Existing Home Sales

10/21/2014
By Jennifer Coombs

Internationally, there continues to be growth concerns in China, as last night, the government announced that the country’s GDP grew by 7.3% in the third quarter (from 7.5% in Q2), which was exactly in-line with economists’ expectations. At the same time, this is the slowest pace of growth since the first quarter of 2009. The decline was primarily due to a weakening real estate market, which is of particular concern since land sales provide nearly 50% of local government revenues.

However, here in the US, we received some potential hope for the housing market in the fall months.

For the month of September, existing home sales got a better than expected pop, increasing by 2.4% to an annual rate of 5.17 million units. However, on a year-over-year basis, sales remain relatively flat at a -1.7%. Condo sales were especially strong during the month, up by 5.2% to an annualized rate of 610,000, although sales of single-family homes increased by a solid 2.0% to an annual rate of 4.56 million. On a year-over-year basis, condo sales were unchanged and single-family homes are down 1.9%. A noteworthy item was that the strength in sales helped to move much of the supply off the market. A total of 2.3 million condos and homes are now on the market versus 2.31 million from the month before. Supply relative to sales ended up falling to 5.3 months in September down from 5.5 months in August. Overall, home prices have been in decline, which of course is a plus for sales; prices are down 4.0% for the month to a median home price of $209,700. However, year-over-year the median price increased by 5.6%. On a regional basis, the West posted a 7.1% monthly gain while the Midwest declined by 5.6% versus August. We saw in recent weeks how flat the housing market has become, but this report provided some good news, especially given the sharp drop in mortgage rates this month.

On the retail front, the two Tuesday sales reports showed some interesting signs of optimism into the holidays. First, ICSC-Goldman’s reading of store sales was soft in the week of October 18th, down 0.3% from the prior week, for a year-over-year rate of 2.1% - the lowest reading since May 2014. Despite this decline, the text of the report was upbeat, and noted particular strength in electronic and apparel stores and based on low gasoline prices, gave a positive outlook for holiday spending. According to Redbook, cool weather helped boost the level of apparel sales last week, lifting their same-store sales to a year-over-year gain of 4.1% versus the 3.8% percent in the prior week. Redbook’s report also notes that Halloween this year falls on a Friday, which should give a boost to last minute holiday shopping. So far, the month of October is tracking flat relative to September at only a +0.1% month-to-month gain.

Jennifer Coombs
Wall Street Strategies

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