Every picture tells a story and this chart of the month-to-month trend in existing home sales tells a very hopeful one. These sales, which comprise 85% of all home purchases, are clearly on an uptrend after establishing a bottom in the second half of 2006. February sales rose 3.9% to an annualized rate of 6.69 million units. Sales increased in every region despite unusually bad weather in much of the country. Both median and average sales prices rose as well, although they remain slightly lower than a year ago.
Clearly, lower prices are beginning to spur demand, and price isn’t the only factor. As builders of new homes scale back to work off their inventories, supply is beginning to diminish. The monthly supply of existing homes for sales is still well above normal at 6.7 months, but it too is on the downswing from the peak of 7.4 months reached last fall.
We are not in the clear yet, but each month’s data strengthens our view that the so-called “sub-prime meltdown” will have relatively little spillover impact on the larger economy.
Chart: Bloomberg News
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