INDICATOR: September Existing Home Sales
KEY DATA: Sales: -1.9%; Prices (Year-over-Year): +9.2%
IN A NUTSHELL: "Home sales are flattening as rising rates seem to be taking a toll out of demand."
WHAT IT MEANS: The housing market is once again the focus of attention as interest rates rose fairly sharply during the summer. Well, it looks like there may have been some damage, but maybe not as much as feared. Existing home sales faded in September after having been flat in August. Originally, there was a solid rise reported for August but that has disappeared under closer scrutiny. Nevertheless, the September sales level is decent and these data do bounce around. Demand faltered in three of the four regions with only the West posting a gain, pointing to a fairly broad-based moderation. As for prices, they are still up, but as expected, the increases are slowing. It was hard to believe that double-digit gains could be sustained. Still, with inventories still pretty low, strong price increases should continue.
MARKETS AND FED POLICY IMPLICATIONS: The housing market is not faltering; it's just that the rapid improvement has been stunted. That is not a terrible thing as many were worried about another bubble being formed. I still think the sector has a long way to go. With the Chaos in Congress (how about that for a horror movie title? Maybe Stephen King can write the screenplay) who knows what the October numbers will look like. Regardless, the fiscal policy uncertainty is likely to push tapering into next year and that should keep mortgage rates down for the rest of the year. Thus, I don't expect the market to ease much further and indeed should start improving again, once the Washington hangover is overcome. The markets have started focusing on the economic data again and since the September employment report will be released tomorrow (Tuesday), I don't think this report will make many waves. But if the jobs data are weak, then the decline in home sales could be taken more seriously.
DATA ALERT: The "non-essential" workers at the BLS and other government agencies' data mills are back at work (hooray) and this week we will get a number of delayed numbers including the following: Tuesday: September Employment Report; Wednesday: September Import Prices; Thursday: August Job Opening and September New Home Sales; Friday: September Durable Goods Orders. The October employment report, originally scheduled for November 1st will be released November 8th.