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Wednesday, December 22, 2010

Existing Home Sales

Novembers Existing Home Sales numbers were released today with better growth than the previous month, but disappointed vs the forecast.  Existing home sales measures the annualized number of residential buildings that were sold during the previous month, excluding new construction.  Existing home sales is considered a leading indicator due to its ripple effects it has throughout the economy.  The forecast called for 4.72 M, the actual headline number came in at 4.68 M.  Yet, the data shows the trend upward since July has resumed, which is positive if you think homes can carry our economy forward again.  It is a component and will be a factor in helping the economy, but won't be a driving force.  
Lawrence Yun, NAR chief economist made the following comment regarding inventory.
Total housing inventory at the end of November fell 4.0 percent to 3.71 million existing homes available for sale, which represents a 9.5-month supply4 at the current sales pace, down from a 10.5-month supply in October.
Ron Phipps, NAR president made the following comments regarding near term buying opportunities.
“Traditionally there are far fewer buyers competing for properties at this time of the year, so serious buyers have a lot of opportunities during the winter months,” he said. “Buyers will enjoy favorable affordability conditions into the new year, although mortgage rates are expected to gradually rise as 2011 progresses.”
Of course interest rates will depend on how the markets react to the FED's efforts in suppressing them, recently they have risen in response.  Also, we need to see if banks fall back to the old ways in financing anybody with interest only or variable interest rate mortgages where the mortgage interest reset (rarely understood by consumers) reset and we do this all over again. 

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