Merk Investments: Existing Home Sales: July 2008
Existing home sales for the month of July increased to 5.0mln vs. a revised 4.85mln posted previously. The inventory in the series increased to 11.2 months and the median price of a home fell to $212k. On a regional basis sales increased 3.1% in the Northeast, 0.9% in the Midwest and 9.7% in the West. Sales activity fell -0.5% in the South. The jump in the West was fueled by a -22.2% decline in the median price of a home.
The data in July was decidedly mixed. The slight increase in the headline will provide some support to claims of a bottom in the market forming. However, the fact that 40% of sales activity came from banks selling foreclosed homes tends to suggest that absent a fire sale in housing sector, we have some ways to go before things truly stabilize. More troubling was the continued increase in inventories. Given the visible surge in alt-a and subprime mortgages this should continue to grow putting further pressure on the median price of a home. While the micro-foundations in select areas of the country appear to be stabilizing, the macro-reality is still quite bleak. Tight credit, falling home prices and a weak labor sector will not provide a stimulus to push potential buyers to take advantage of the buyers market. The data supports our call of the housing sector not seeing anything resembling stabilization until mid 2009 at the earliest.
Joseph Brusuelas
Merk Investments
Chief Economist/VP Global Strategy
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