Economic data

Existing Home Sales in Sept totaled 4.91mm annualized, exactly in line with estimates and Aug was revised up a touch to 5.06mm. Closings of single family homes fell by 3.6% m/o/m while condos/co-op sales were up 1.8%. Even though the absolute amount of homes for sale fell to the lowest since Jan, because of the sluggish sales figure, months supply ticked up to 8.5 from 8.4. The median home price fell 3.5% y/o/y. Distressed sales totaled 30% of sales vs 31% in Aug. Contract failures, defined as “declined mortgage apps, failures in loan underwriting from appraised values coming in below the negotiated price, or other problems including home inspections and employment losses,” totaled 18%, unchanged from Aug but well above 9% one year ago. Outside of the continued issues that are well known with closings, recently the loan limits of mortgages that FNM and FRE can buy or guarantee have been lowered, particularly in more expensive housing markets. This fact also likely pulled closings into the month of Aug as people took advantage before the limits were lowered. Outside of the barriers of a tough labor market, difficult access to credit and accurate appraisals, we have the secular decline in the homeownership rate. As of Q2 it was 65.9%, down from the record high of 69.2% in Q2 ’04 and compares with the record (since record keeping started in Q1 ’65) low of 62.9% in 1965 and the 45 year average of 65.4%.

The Oct Philly Fed mfr’g survey was well above expectations at +8.7 vs the estimate of -9.4 and up from -17.5. After sharply negative readings in Aug and Sept, New Orders rose 19 pts to +7.8 and Backlogs rose by 13 pts to +3.4. Shipments went from -22.8 to +13.6 while Inventories fell to -7.7 from +10.2. Employment was the key drag as it fell to 1.4 from 5.8 but the Avg Workweek rose to +3.1 from -13.7. Prices Paid and Received both fell slightly. The 6 month outlook rose to 27.2 from 21.4 in Sept and 1.4 in Aug. Bottom line, a pleasant surprise in the positive data but comes off sharp declines in Aug and Sept and the figures measure the direction of change rather than the degree. It does follow a poor NY figure on Monday and means that we need to see more regional survey’s and the national ISM number in order to get a more confirmed conclusion on the state of mfr’g.

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