Existing Homes Sales posted an upside surprise, coming in at a 5.59 million annual rate, hitting their fastest sales pace in eight years.

Posted on August 27, 2015

No one would call today’s housing market a raging success, but it is moving ahead pretty well, considering. Housing Starts went up nicely in July, hitting a 1.206 million annual rate, and they’re now up 10.1% over a year ago. The month’s gain all came from a 12.8% hike in single-family units, which are up 19.0% in the last 12 months. Notably, this performance followed the boom in starts reported in June. Building Permits, however, were down in July, dipping to a 1.119 million annual rate. Yet single-family permits are up 6.1% and multi-family permits up 9.7% compared to a year ago.

Sales of previously owned homes also went ahead nicely in July. In fact, Existing Homes Sales posted an upside surprise, coming in at a 5.59 million annual rate, hitting their fastest sales pace in eight years. This was the third month in a row sales rose. They’ve also been up five of the last six months and have scored year-over-year increases for ten consecutive months. Of course, tight supply and rising prices could slow things down, but more inventory should come to market in the coming year, as sellers who were on the fence jump in to grab those price gains amidst strong buyer demand. Total existing home sales are now up 10.3% versus a year ago.

Stocks sank heavily on Friday, their biggest plunge in a week of heavy selling that sent the Dow Jones Industrial Average to a level seen as a correction. The blue chip index sank 5.8% for the week, winding up more than 10% below its record close in May, which is the widely accepted definition of a correction. The S&P 500 and the Nasdaq suffered their worst weekly drops in four years. Many saw this as profit taking by market technicians, but others worried about China’s softening economy and weaker global economic growth, valid concerns in today’s interconnected world. These pressures could also delay the Fed’s interest rate hike til year end.

The U.S. economy actually wasn’t looking too bad. In addition to the very fine housing data reported above, real (meaning inflation-adjusted) hourly earnings are up 1.9% in the last year, while real weekly earnings are up 2.2%. The Consumer Price Index (CPI) for July revealed core prices (excluding volatile food and energy) remain close to the Fed’s 2% inflation target. The Philadelphia Fed Index showed stronger manufacturing activity in that region, but the New York Empire Index came in with its lowest reading since April 2009. Initial jobless claims were up a bit yet under 300,000 for the 24th week in a row, while continuing claims dropped to 2.254 million.

The week ended with the Dow down 5.8%, to 16460; the S&P 500 down 5.8%, to 1971; and the Nasdaq down 6.8%, to 4706.

While stock indexes around the world were making multi-month lows, money flowed into U.S. bonds, pushing prices up nicely. The 30YR FNMA 4.0% bond we watch finished the week UP .85, to $106.16. Freddie Mac’s Primary Mortgage Market Survey for the week ending August 20 showed national average fixed mortgage rates largely unchanged. Rates have remained at very attractive levels now for five weeks straight. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.

Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… Last week’s release of the minutes from the Fed’s last meeting gave no clear signal for when a rate hike may begin. December now looks likely to many economists. Note: In the lower chart, a 28% probability of change is a 72% certainty the rate will stay the same.