Existing home sales posted their second straight monthly increase after hitting the lowest level in the series since records for total sales (both single and multiple-unit home types) began in 1999. Sales of single-family homes increased 10.0% in August to 3.97 million annualized units, while condos and co-op sales rose 9.8% in the month to 560,000. The monthly strength was widespread with solid increases in the Midwest (14.5%), South (10.6%), Northeast (10.1%) and West (5.0%).

The median price of existing homes fell 2.4% on a year-over-year basis because distressed housing sales (which typically sell at least at a 15% discount) made up 35% of total sales and applied downward pressure on prices. In terms of inventories, the absolute number of homes for sale fell 1.9% to 4.04 million that, combined with the increase in the pace of sales, pushed the months’ supply of unsold homes on the market down to 10.7 from the reading of 12.0 in August. 

Today’s reported rise in existing home sales provides further evidence that the U.S. housing market is stabilizing; however, this is occurring at incredibly depressed levels of activity with September sales figures representing the third lowest on record. A weak level of activity was expected during the summer sales season because homebuyers brought forward purchases ahead of the expiry of the home buyers’ tax credit at the end of April. Going forward, the distortions associated with the tax credit will fade, and today’s report noted that the market should see a “gradual rising trend” as buyers respond to “historically low mortgage interest rates and very favourable affordability conditions”. With that said, resale activity is expected to be subdued in the near term, as the unemployment rate remains elevated, consumer confidence remains depressed and a large volume of distressed properties come onto the market. These factors should result in continued concerns about the sustainability of a housing market recovery and could be a key driver leading the Fed to keep monetary policy at highly stimulative levels for “an extended period.”