Existing Home Sales Lower Than Any Economist's Estimate; Rising Supply a Good Thing?

Existing Home Sales Disappoint

Economists overestimated existing home sales today, rounding out another impressive day of overoptimism.

New home sales came in at a seasonally adjusted 5.04 million annualized rate.

The Bloomberg Consensus Estimate was 5.22 million. 5.04 million was below the lower end of the consensus range of 5.10 M to 5.32 M.

Existing homes sales are not living up to springtime expectations, down 3.3 percent in April to a 5.04 million annual rate which is just below the low-end Econoday forecast. Three of 4 regions show contraction in April with the sharpest decline, minus 6.8 percent, in the South, which is by far the largest housing region. Year-on-year, total sales are still up a respectable 6.1 percent.

Another positive is a rise in supply with 2.21 million used homes on the market vs 2.01 million in March. This rise, together with the drop in sales, raises supply relative to sales to 5.3 months from 4.6 months. And another positive is a 4.1 percent rise in the median price to $219,400 which is up 8.9 percent year-on-year.

But this report in sum is a disappointment, failing to point to any building momentum. Strength in the housing sector may be switching, from existing home sales to new home sales at least based on this report compared to the historic surge earlier this week in housing starts & permits. But housing data month-to-month are always volatile and, on net, it's too soon to decipher how strong the spring housing season is right now.

Existing Home Sales



Existing Home Sales Month's Supply



Rising Supply a Good Thing?

Bloomberg says "Another positive is a rise in supply with 2.21 million used homes on the market vs 2.01 million in March. This rise, together with the drop in sales, raises supply relative to sales to 5.3 months from 4.6 months."

That strikes me as circular reasoning, if not completely ridiculous. Month's supply will automatically rise when sales decline.

Supply rising in 2005 was a sign of a major problem coming up. Apparently it's different this time. The Goldilocks' theory, which I find absurd, is that low supply is what's holding back buyers.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com