Wall Street Greek: Existing Home Sales Puts Skids to Market

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home sales wall street stock market writer

The stock market hit the skids today, thanks mostly to a bummer of an Existing Home Sales Report for August.

Existing Home Sales Skid

After four consecutive months of improvement, sales of existing homes slipped in August. The annual pace of sales was reported at 5.10 million through the summer month, short of economists' consensus for a rate of 5.35 million and down from July's 5.24 million. In the preceding four months, sales gains had accumulated 15.2%, but with unemployment still rising, something had to give. Even so, August's disappointing pace still marks improvement over the prior year figure of 4.93 million.

Get this!

The National Association of Realtors attributed some of the decline to an increasing flow of contracts entering the system, overloading it and thus driving longer closing times. If you are buying that story, I have a wonderful old historic bridge in old New York town that I would like to sell you. If you think the system cannot handle sales growth from this meek base, well then consider how well it managed just a few years ago. I know! I know! There has been major consolidation and buku bankruptcy, but this still sounds like a lame lie to me. Especially while the real under-employment rate nears 20%.

The good news is that, just yesterday, the Fed reiterated its interest in keeping housing financing affordable. Freddie Mac (NYSE: FRE) data agrees, indicating the national average fixed rate mortgage was locked in at 5.19% in August, versus 6.48% a year prior. AND we still can't get this motor running!?!

Much of the last few months' growth has rightly been attributed to first time home buyer tax credits and the foreclosure flood. First time home buyers accounted for roughly 30% of sales in August, while distressed property sales marked 31% of the total. Both sales segments were relatively unchanged from July, so it's hard to attribute this month's tiring to a change in either. The tax credit expires at the end of November, and so industry participants are pleading for its renewal. We think they will get it.

There was, however, good news to report in housing inventory, where August's 8.5 month supply marked improvement over July's 9.3 month tally. With the sales pace slipping, it's even more impressive to see inventory improve. This means the flood of foreclosures and other distressed sales must be trickling down, though "trickling" is the wrong choice of words. Let's say, we're not drowning in them, but still lost to sight in the white water. Distressed sales continue to impact the average sales price of a home, with the median price slipping by $4,500 to $177,700 in August.

Regionally speaking, sales dipped across the board against July's plumped production, but were generally flat to higher when compared against prior year totals. Basically, the market has gotten past rejoicing in the fact that the world has not ended, and is now asking for more. It's a "show me" stock market now my friends. That, and the economy, might pose a problem for your portfolio over the next month or two.