Existing Home Sales: Back-to-Back Gains

Existing Home Sales rose by 0.6% in November to 6.28 million, compared to expectations for a small decline to 6.20 million. This was the first back-to-back increase in home re-sales since March/April 2005. Despite these gains, existing homes sales are still 10.7% below their year ago level and 13.6% below their June 2005 peak level. Single-family existing home sales increased by 0.2% while condo/co-op sales jumped by 3.1%. Home re-sales are counted when the
transaction closes for these data are primarily for sales that were initiated in September. The Inventory of Homes Available for Sale fell by 1.0% to 3,820k, a level that is only slightly below its record level in July. Stocks of unsold single family homes dropped by 1.5% while unsold inventories of condos/co-ops increased by 1.8%. Despite the decline, the number of homes available for sale is 30.6% above year ago levels; the number of single family homes for sale are
up 29.6% over the past year while the number of condos/co-ops available for sale are 36.8% above year ago levels. The Months' Supply eased to 7.3, after hitting its highest level in more than 7 years in October. Home Prices fell on a year-on-year basis for the fourth consecutive month, the first time this has happened during the 38 years of data collection. Average prices slipped by 1.8% and median prices dropped by 3.1%. Bottom Line: Existing home sales peaked during the summer of 2005 and fell hard between then and September. However, in the past 2 months, home re-sales appear to have stabilized. Slower sales have kept inventories of unsold homes at very high levels although they are beginning to trend lower. In turn, this has pressured prices, which are now falling. Further declines are anticipated. Although home sales appear to be stabilizing, home construction will continue to shrink.

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