Houston's Rate Sheet

Existing home sales holding on

The National Association of Realtor's Existing home sales report came in today, and it was better than expected. It appears that interest rates are not scaring off buyers, and the housing market has not yet tanked as predicted by pessimists. Here's some analysis from Joel Naroff, Chief Economist for Commerce Bank:

March Exiting Home Sales

KEY DATA: Total Sales: +0.3%; Single-Family: +0.3%; Condos: +0.2%
IN A NUTSHELL: “So far, the cracks in the housing market are not that great, but with inventories skyrocketing, that may not last long.”

WHAT IT MEANS: The housing market has not fallen apart yet. Existing home sales rose a touch in March, the second consecutive increase. That was quite a surprise as most analysts were looking for home sales to decline. Even condo sales were up. Small increases in the Northeast and Midwest overcame modest declines in the South and West. Basically, sales were static over the month, which given all the worries, were not that bad. In addition, prices were essentially flat for both single-family homes and condos. That is even more surprising given the surge in inventories. The number of single-family homes on the market is up by almost one-third over the year and the number of condos for sale has nearly doubled. In just one month, the supply of single-family homes rose 5.5% and condos 16%. And prices are stable? Strange, very strange. How long inventories can rise without triggering significant price cuts is unclear, but there are so many homes on the market already that we could see the market break soon.

MARKETS AND FED POLICY IMPLICATIONS: So far, the pull back in housing remains orderly, at least in the existing market. But the red flags are up. Inventories continue to rise and that is a warning that prices cuts could be coming, and soon. I suspect that the members of the Fed will be as confused about what is going on in the housing market as I am. But as long as housing does not tank, their job is more difficult. There appears to be growing worries at the FOMC that further increases could create problems down the road when the full impact of the rate hikes ultimately take effect. The FOMC members probably would like to pause. But the data right now are not giving them much cover. It is likely that we will get another rate hike on May 10th. It will be interesting to see if Mr. Bernanke sheds any light on that in his testimony on Thursday.

posted by Vincent Biondillo @ 1:36 PM