Traders appeared to cheer the news Thursday that existing home sales rose slightly in Augustfrom the lowest reading on record in July (survey began in 1999). Following the release of the data, stocks recovered most of their early losses. Existing home sales were up 7.6% in August (compared to July) to an annualized rate of 4.13 million units - slightly ahead of the consensus estimate of 4.10 million units. On a year-over-year basis, however, existing home sales fell 19% compared with August, 2009. While a portion of the YOY drop can be attributed to the anticipated expiration of the $8,000 tax credits late last year, it should also be noted that mortgage rates are now materially lower than they were last year.
It was the government's hope that ultra-low mortgage rates, spurned by the Fed's purchase of a trillion dollars in mortgage-backed securities, would ignite more demand for houses. The waiting continues.
Combining the new data with the other housing data we received earlier in the week, the picture is not very pretty.
On Monday, we got theNational Association of Homebuilders index. This index is comprised of a three-question survey of homebuilders, and it seeks to uncover sales and traffic trends. The survey came in below expectations at 13 (consensus estimate was 14) - in line with last month's reading and the lowest level since March 2009. It does not appear as though builders are very confident about their current or future sales. But hold on...
On Tuesday, we received Housing Starts and Building Permits. Both figures came in better than expectations. Housing Starts rose 10.5% sequentially to 598,000 (consensus was 550,000), and Building Permits rose 1.8% sequentially to 569,000 (consensus was 560,000). However, the Housing Starts gains were driven by a 32.2% increase in multi-family units, which tend to be highly volatile from month to month. Starts of single-family houses, which represented 73% of the total starts, rose a much more modest 4.3%. The same was true for Building Permits, which, absent the growth in multi-family permits, fell to the lowest level since April 2009.