September Existing Home Sales

After improving for two months, existing home sales declined in September according to the National Association of Realtors.   The 1.7 percent slip brought the seasonally adjusted annualized rate of sales to 4.75 million after August’s upwardly revised sales rate of 4.83 million units.  Year-over-year, the figure has improved by 11 percent.

Interest rates continued to be accommodative for the housing market by helping buyers afford more home than was possible this time last year.  The national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to another record low.  The 3.47 percent rate compares to 4.11 percent a year ago.  The median price is up 11.3 percent from a year ago even though the month-over-month price ticked down.

The total housing inventory is slightly tighter than in August.  There are roughly 2.32 million existing homes for sale.  At the current sales pace, it will take 5.9 months to sell all of them. August’s inventory was 6.0 months worth of transactions.   Last September’s stock of homes represented 8.1 months of sales. The lack of supply is probably contributing to the firmer prices seen around the nation.

Housing appears to be genuinely improving.  There have been months of increasing prices and transactions.  This is one area the Federal Reserve is hoping to bolster in order to stimulate demand in other parts of the economy.  The thought is that if consumers feel wealthier because of increasing home prices, Americans will spend more.  A decline in inflation adjusted after-tax income is countering this “wealth effect.”   Disposable income fell in August after months of slowing.  Consumers will need income growth in order to consume because the days of spending the equity in one’s home on everyday items have passed, and it is not irrational to think banks are years away from endorsing that behavior again.  This wealth effect is appreciated by the economy, but it can hardly be called a panacea.    (by C. Cox)