Home Sales – A Preview
Sales data of existing and new homes for the month of September will be published on October 23 and October 28, respectively. Market expectations are for gains in sales of both existing homes (+4.9% to 5.35 million units) and new homes (+2.5% to 440,000 units). These gains would translate into a 19% increase in sales of all existing homes from the bottom established in January 2009 (4.490 million units). The likely increase in sales of new homes in September would imply a 34% jump in sales from the record low mark of January 2009 (329,000 units).
The number of unsold existing and new homes will indicate the extent of improvement in the housing market. Inventories of existing homes have dropped to a seasonally adjusted 8.1-month supply from a cycle high of 11.3-month supply in November 2008, while the inventories-sales ratio for new homes was 7.3-months in August vs. a cycle high of 12.4-months seen in January 2009.
The pending home sales agreements and Mortgage Purchase Index of the Mortgage Bankers Association suggest an increase in home purchases during September. The Mortgage Purchase Index for the week ended October 16 declined 7.6%. But, the three-week average for October exceeds the September tally, implying a possible increase in homes sales in October also.
A little-noticed aspect of the housing market is that there is a willingness in recent weeks among households to finance home purchases with adjustable rate products (see chart 3). At the close of 2008, less than 1% of mortgages were of the adjustable rate variety. As of the week ended October 16, 6.4% of mortgages were adjustable rate products.
