Existing Home Sales Fell a Larger Than Expected 8% MoM in September

Existing home sales fell to the lowest level since records began in 1999. The 8% MoM decline was almost double the -4.5% drop that was anticipated. Single-family home sales fell -8.6% MoM, while multi-family sales fell a more moderate -4.3% MoM. The supply of homes rose to 10.5 months, at the current sales pace, also another record low since records began in 1999. By category, singly family inventory is running at 10.2 months and multi-family (condos, townhouses, etc) is up to 12.6 months of supply.

Both median and average prices fell in September. Median home prices dropped by -4.2% YoY to $211,700 while average home prices fell by -3.2% YoY to $257,800. In both categories, condos/coop prices are higher than single-family prices. All of the decline happened in single family pricing, while multifamily rose around +1.5% YoY. Next week's Case-Shiller data is expected to provide better quality data on home price declines. Today's series of data is more dependent on a changing mix of homes being bought and sold during the month, rather than comparing repeat sales of the same homes.

By region, sales fell -12%MoM in the West, followed by an -11.1% decline in the Northeast, -7.9% fall in the Midwest, and a -6.5% drop in the South. Versus a year ago, sales have fallen -11.4% in the Midwest, followed by a -9.9% drop in the West, a -8.9% decline in the Northeast, and a -7.2% back-up in the South. Prices fell in all regions of the country. The most expensive region remains the West, where the average price was $354K in September. The least expensive region is the Midwest at $199K.

Existing home sales lag actually original contract signings by 1-2 months, on average. So this data shows the beginning of the intensifying subprime problems of July and early August, but most likely not the worst of the fallout. Pending home sales fell -6.5% MoM in August after falling -11% MoM in July. Most economists are expecting further deterioration in home sales following the credit crunch which began this past summer. The MBA estimates that new mortgage volume this year will fall to the lowest level since 2000. It looks like housing will remain a drag on the economy for a while. The fed funds futures market is pricing in a 98% probability the Fed will ease by 25bp next week (Halloween). Tomorrow we get September new home sales data, which are currently predicted to fall by -3.1% MoM after declining -8.3% MoM in August. New home sales data is considered to be more timely than existing home sales data.