Monday, November 23, 2009

Big Jump in Home Sales

The Lehmann Letter ©

Today the National Association of Realtors announced a big jump in existing-home sales:

Sales were a revised 5.5 million in September and jumped to 6.1 million in October at a seasonally adjusted annual rate.

You can see the strength of this gain if you plug October’s 6.1 million into the chart below. It represents a significant upward trend.

Existing Home Sales

(Click on image to enlarge)

Recessions shaded

Now for some big questions: Will this surge expire on April 30, 2010 along with the first-time home-buyer tax credit? (Recall that auto sales fell back to earth with the end of the cash-for-clunkers program.) Can momentum be maintained if the tax credit is extended, or have most potential buyers already acted? Is this an omen for new-home sales and residential construction, or will the market-overhang of unsold inventory and rising foreclosures continue to depress new-home building?

These questions are important because the economy can’t recover unless existing-home activity is reflected in new construction.

Stay tuned.

(The chart was taken from [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)

© 2009 Michael B. Lehmann

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