The housing recovery continues to hold its own, with data issued earlier this morning showing that sales of existing homes ticked down only slightly in September, notwithstanding the rise in interest rates and the impasse in Washington, which sapped some of the nation's confidence.
In all, the National Association of Realtors, a large trade group, reported that sales of previously owned properties came in at an annualized rate of 5.29 million homes last month. That was down from the downwardly revised August total of 5.39 million homes sold. Originally, the August total had been estimated at 5.48 million homes. That said, the August-September total sales pace was still the best since 2009, when the nation was just exiting the most severe economic downturn since the 1930s. In all, the estimated September sales figure was in line with the forecast level of 5.30 million homes sold.
Importantly, the latest figures reflect deals that closed in September. However, while the deals closed last month, the decisions to buy were made in June, July, and August, when the pickup in borrowing rates was going on. Since then, rates have come down a bit as tapering talks has softened with regard to the Federal Reserve. In late August, the 30-year fixed-rate mortgage had climbed to 4.58%, a full percentage point above the historically low May rate. Borrowing costs, as noted, have eased back somewhat since then.
One cautionary note, however, was offered by the National Association of Realtors. The trade group suggested that "Home affordability is getting hit quite sharply. Home prices are increasing quickly, while incomes are barely rising, and now we have higher mortgage rates compared with a year ago. Lower affordability will hamper home sales going forward." However, as we noted, mortgage rates have now ticked down since the September figures were calculated. Also, the most recent data came before the Washington crisis had flared up. There could be some effect from the government closures and debt-ceiling debate in the October figures due out next month.
Overall, housing recovery remains viable, and this heretofore beleaguered sector is still an important driver in the nation's aggregate business recovery. Importantly, house prices are still strong, having climbed by 11.7% in the past year, while inventories are not climbing much as yet. Indeed, the supply of unsold homes is just at five months, a healthy figure and no more than half what it was at the trough of the long downturn in this sector.
Looked at on a whole, this was a reasonable report and changes little, either about housing or the economy at large. We still think homebuilding and housing activity will stay relatively brisk, while the economy, overall, should proceed with growth on the order of 1.5%-2.5% over the next several quarters. At the time of this article's writing, the author did not have positions in any of the companies mentioned.