A Close Look At Existing Home Sales

Existing Home Sales ROSE by 9.4% in September to 5.57 million, compared with market expectations for a smaller increase to 5.35 million.

- This increase has lifted sales to their highest level since July 2007.
- Over the past year, existing home sales have increased by 9.2%. However, this is 23.2% below their September 2005 record high.
- About 45% of sales were estimated to be to first-time home buyers, spurred by low prices and the home buying tax credit from the government.
- About one-third of sales were estimated to be distressed.

The Inventory of Homes Available for Sale FELL by 7.5% to 3,630k. With this decline, the inventory of homes available for sale is now 15.0% below its year ago level. This reduced the months supply to 7.8, its lowest level in since March 2007. This is supply is significantly lower for relatively low priced homes and substantially higher for relatively high priced homes. However, there appears to be a large "shadow" inventory of homes available for sale, both from homeowners who have kept their homes off the market because of low prices and from financial institutions temporarily holding foreclosed homes off the market.


Home Prices continued to decline compared to their year ago levels. Over the past year, average prices have fallen by 6.5% while median prices have tumbled by 8.5%. Year-on-year prices have declined in 37 of the last 38 months and are still falling moderately, partly reflecting a shift in the composition of sales to lower priced homes and partly reflecting the much lower prices associated with distressed sales.

Excerpts from a 10/23/09 Existing Home Sales report by Steven A. Wood, Chief Economist of Insight Economics.

New housing starts rose less than expected

Published Tue, Oct 20 2009 11:20 AM by Adam Quinones


New housing starts rose less than expected to 590,000 annualized units, economists were expecting a rise of 610,000 units after a read of 598,000 in August (which was revised lower to 587,000 annual units). The rise in new housing starts was a factor of a 3.9% increase in single family construction starts while multifamily starts fell by 15.2%. Building permits fell by 1.2% to 573,000 annual units led by a 3.0% decline in single-family permits while multi-family permits rose by 6.0% to 123,000 annualized units. ...

Fed continues to slow down on the purchase of Mortgage Backed Securities (MBS)

The Federal Reserve today reported on their weekly purchases of agency mortgage-backed securities (MBS). In the four trading days between October 8 and October 14, the Federal Reserve purchased a total of $21.42 billion agency MBS. In those four days the Federal Reserve sold a total of $5.32 billion agency MBS with almost all sales being Fannie Mae 5.5 MBS coupons. After sales, the Fed's weekly net purchases were $16.1 billion.

The goal of the Federal Reserve's agency MBS program is to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally. Only fixed-rate agency MBS securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae are eligible assets for the program. The program includes, but is not limited to, 30-year, 20-year and 15-year securities of these issuers.

Since the inception of the program the Federal Reserve has spent $941.03 billion, or 75.28% of the allocated $1.25 trillion which is scheduled to run out in March 2010.

This is the fifth consecutive week the Fed has reduced MBS purchases. A slowdown of daily purchases is expected as the Fed begins to exit from the agency MBS purchase program. Up to this point the gradual withdrawal has not affected the performance of MBS coupons against benchmarks. This is a function of a slowdown in new production from originators.