U.S. Existing Home Sales Rebound as Inventories Decline
Existing home sales in the United States rose 2.4% in May to 4.77 million annualized units. Expectations were for a slightly stronger gain of 3% to 4.82 million units from April's 4.66 (revised from 4.68) million. Both single-family homes and condos experienced gains, with the former up 1.9% and the latter rising 6.1%.
In another positive sign for the housing outlook, excess inventory showed signs of being cleared. Inventory, as measured by months' supply, fell to 9.6 from 10.1 in April (revised from 10.2). In absolute terms, inventories fell to 3.80 million units from April's 3.94 (revised from 3.97) million units. The fall in inventories came despite an increase in house prices. The median price (not seasonally adjusted) rose 3.8% on the month to $173,000.
Today's improvement in existing home sales and inventories are amongst the indicators suggesting that the U.S. housing market has bottomed. Housing starts for May rose 17.2% with single-family home starts at their highest level since November of last year.
However, the overall level of housing activity remains weak. Thus, at tomorrow's interest rate decision, we expect the Federal Reserve to maintain interest rates within their current low range and reiterate its commitment to continued quantitative and credit easing. With long-term yields on the rise, there has been some speculation that the Fed may commit to keeping its overnight target rate on hold until a particular date in the future as the Bank of Canada has done.
In another report out this morning, the FHFA measure of house prices fell 0.1% in March. Expectations were for a steeper 0.4% monthly decline. On a year-over-year basis, prices were down 6.8%
RBC Financial Group
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The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.
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