Existing Home Sales Spike
The National Association of Realtors reported on Monday that sales of previously owned homes picked up in September, but not enough to sway the Federal Reserve from their expected decision in November to extend stimulus measures. Existing home sales increased for the second consecutive month, up 10 percent from August, to a seasonally adjusted rate of 4.53 million units.
While the gain significantly exceeded analysts' expectations of a 4 percent increase to a pace of 4.3 million, sales remain well under the 5 million pace mark generally associated with a healthy market. A number of analysts say that the data indicates that the post-tax credit lull has come to an end and the market is now in a gradual recovery in the market.
US stock prices edged higher on the report, while Treasury debt prices remained steady at elevated levels. The dollar narrowed the gap with the euro.
The NAR's report precedes the Federal Reserve meeting next week, when the central bank is expected to announce their decision to stimulate the economy through additional purchases of bonds. The strategy, called quantitative easing, is designed to decrease borrowing costs and drive up demand. The Fed has already purchased about $1.7 trillion in Treasury and mortgage-related debt and cut overnight interest rates to near-zero in December 2008, where they have remained since.
The real estate market is showing small signs of having reached a bottom in the aftermath of the expiration of federal tax credits for homebuyers. Activity still remains sluggish, however, and a recovery will almost certainly be subdued by the still-high unemployment rate of 9.6 percent. Inventory of previously owned homes on the market in September was 4.04 million units, or a supply of 10.7 months at the current sales pace. It was a drop of just under 2 percent from August's inventory.
The nation's median sales price in September was $171,700, a 2.4 percent decrease from the median in September 2009.
Recent discoveries of questionable foreclosure practices by some of the nation's largest lenders, however, threaten to derail the recovery. Analysts worry that the joint investigation by prosecutors in all 50 states could hinder the correction in the market as banks, voluntarily or otherwise, hold back on foreclosing thousands of homes.
According to NAR figures about 20 percent of homes on the market are foreclosures. The group has steadfastly spoken out against the government calling for a broad-based moratorium in seizures. Foreclosed properties accounted for 23 percent of all sales in September while short sales accounted for another 12 percent.
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