On September 24th August existing home sales will be released at 10:00 ET. The report measures the level of sales of existing homes in the US. The existing home sales report is a good indicator of activity in the US housing market and is considered a reliable gauge of demand in the US housing market. The trade generally looks to compare the existing home sales report with existing home sales in the prior month and focus on two key components of the report the inventory of homes for sale and the median sale price.
July existing home sales rose by 7.2% to 5.24 mln units. The annual rate of 5.24 mln units compared to 4.89 mln units in June. Economists had expected a rise of 5 mln units for the July existing home sales. The monthly existing home sales gain was the largest on record. A 12.5% surge in condominium sales was responsible for most of the improvement in the July existing home sales report. The inventory of homes remained high and was unchanged at 9.4 months. The medium home price sale fell 2% to 178,400 and remains down 15% y/y. According to the chief economist at the National Association of Realtors, Yun, the July existing home sales confirms that the housing market has decisively turned for the better. Yun attributes the improvement of existing home sales to buyers taking advantage of the housing stimulus tax credit and improved housing affordability. The stimulus plan included an 8K tax credit for first-time home buyers. Housing affordability has greatly improved with 30 year mortgages averaging 5% and home prices falling more than 30% since Q2 2006.
Existing home sales are expected to rise for a fifth month in row in August. August existing home sales are expected to rise 2.2% to 535 mln units compared to 524 mln last month. The August report is expected to confirm that the US housing market has reached bottom. The strength of the housing market recovery remains uncertain. Existing home sales may begin to slow as the sale of the distressed properties continue work through the system and the 8k credit for first time home buyers may be allowed to expire in November. (There are a number of bills in Congress that seek to extend the 8k first time home buyer tax credit for another six month). Distressed sales accounted for 31% of all existing home sales in July. The biggest risk to the continued improvement in existing home sales is the fact that the inventory of existing homes remains high and has been largely unchanged since December. With foreclosures reported at a record high in Q2 the continued sale of distressed homes means that the inventory of existing homes will likely remain high for some time and that the price decline in existing home sales has most likely not yet reached a bottom.