Financial News

Monday November 23, 03:40 PM
INSTANT VIEW 8-Existing home sales at best rate since Feb 07

NEW YORK, Nov 23 (Reuters) - Sales of previously owned U.S. homes rose in October at a faster-than-expected pace to the highest in more than 2-1/2 years as buyers rushed to take advantage of a popular tax credit, a survey showed on Monday. Story: Table: KEY POINTS: * The National Association of Realtors said sales surged a record 10.1 percent to an annual rate of 6.10 million units, the highest since February 2007, from a downwardly revised 5.54 million unit pace in September. * Analysts polled by Reuters had expected October sales to jump to a 5.70 million unit pace from the previously reported 5.57 million units in September. Compared to October last year, home sales were up by a record 23.5 percent. COMMENTS: STAN HUMPHRIES, CHIEF ECONOMIST, ZILLOW.COM, SEATTLE, WASHINGTON: 'Wow. A 10.1 percent increase in sales from last month and a 23.5 percent increase from a year ago. In my opinion, it's a testament to just how powerful of an effect policy can have on housing demand. And I don't mean that to be entirely positive as I think some fundamental weaknesses in the housing market are being papered over by a strong shot of adrenaline in the form of buyers rushing to take advantage of the expiring tax credit and historically low mortgage rates. The extension and expansion of these tax credits may keep sales from quickly falling off the cliff in the next couple of months, but we are going to have to pay back this demand at some point in the near future.' JACK ABLIN, CHIEF INVESTMENT OFFICER, HARRIS PRIVATE BANK, CHICAGO: 'This is an inside the park home run. With the prodding of the federal programs, this economy is certainly making some great strides.' GEORGE GONCALVES, HEAD OF FIXED INCOME RATES STRATEGY, CANTOR FITZGERALD, NEW YORK: 'The bond market's been a little bit under pressure this morning, after a really strong run that we've had last week. There are a lot of folks that will comb through these numbers to figure out the rationale and justification for it. On the surface it's better than expected but there's the belief in the bond market that a lot of these numbers are being artificially propped up through government intervention, so there's the question of how long these numbers will remain up--not just one number. 'Two-year notes have backed up enough enough so that if you liked them at 68 last week you're going to like them at 80 this week.' KIM RUPERT, MANAGING DIRECTOR OF GLOBAL FIXED INCOME ANALYSIS, ACTION ECONOMICS LLC, SAN FRANCISCO: 'It was stronger than most of us had expected. We had heard rumors going into the data but it is hard to expect a jump like that. 'It's kind of counter-cyclical. Typically home sales -- existing or new -- don't really increase that much during the fall or winter. 'The data is consistent with the theme that the economy is recovering and that the housing market has hit bottom.' STEVEN WOOD, CHIEF ECONOMIST, INSIGHT ECONOMICS, DANVILLE, CALIFORNIA: 'Existing home sales peaked during the summer of 2005 and fell steadily through November (Frankfurt: A0Z24E - news) 2008. However, since then, there has been a moderate recovery in sales. However, a significant number of the sales are of distressed properties, which is depressing home prices. The inventory of homes available for sale has fallen substantially over the past year and is now only modestly above 'normal' levels. However, anecdotal evidence suggests a substantial 'shadow' inventory that would come onto the market if sales, and especially prices, were to pick up. Home prices have been falling on a year-on-year basis for more than three years but the pace of that decline appears to be slowing.' JOHN CANALLY, ECONOMIST, LPL FINANCIAL, BOSTON: 'More signs of improvement in housing. Housing sales are up 21 percent since January, so that's a pretty good sign. Unfortunately though house prices are only up about 5 percent from the January lows, but they're only down 7 percent year-over-year. 'Maybe this is just sales that were done in August and September ahead of the first-time home buyer expiration. Of course it didn't expire. So it's just unclear if there's any pull-ahead, to what extent that might have distorted the data. 'Overall, pending home sales are still pretty strong and they lead existing home sales by a couple of months and they are up 8 months in a row. The gain in existing home sales continues I think into early 2010.' HUGH JOHNSON, CHIEF INVESTMENT OFFICER, JOHNSON ILLINGTON ADVISORS, ALBANY, NEW YORK: 'These are very good numbers. They are obviously stronger than had been forecast. What had been expected was 5.7 million. So what is particularly encouraging is that the inventory overhang, or month's supply, declined from 8 months to 7 months. An average, or normal, inventory overhang is 6 months. As we move closer to that, the downward pressure on prices will be lifted. So these are good numbers and they say fairly clearly that the low point for housing was in the January to March of 2009 time frame. So even though you see some of the month-to month-housing numbers don't look good, generally, they've been improving. To me it says very clearly that we've passed the low on housing.' GEORGE DAVIS, SENIOR CURRENCY STRATEGIST, RBC CAPITAL MARKETS, TORONTO: 'The data adds to bearish U.S. dollar momentum, as stronger-than-expected home sales data is bullish for equity markets. That decreases risk aversion and increase broad-based dollar weakness. The Fed will have to see a significant uptick in the variable surrounding inflation, such as CPI (NYSE: CPY - news) , to move early on rates. I think central banks are trying to avoid what happened in Japan in the 1990s when a tentative 25-basis-point rate hike derailed recovery. So even if housing improves, as long as they don't see a significant inflation buildup, the Fed will want to leave rates low as long as possible. They want to see signs of a more concrete and sustained recovery first.' PETER CARDILLO, CHIEF MARKET ECONOMIST, AVALON PARTNERS, NEW YORK: 'It's obviously good news. This came in much stronger than expected. It's a step in the right direction and certainly further indication that the economy is probably not headed for a double-dip recession next year. I think we're headed for some sort of a V-type recovery.' STEVE GOLDMAN, MARKET STRATEGIST, WEEDEN & CO, GREENWICH, CONNECTICUT: 'Nice surprise for markets; it sees a drop in inventories, it sees a market that is still coming off the lows in a robust fashion... the price declines are enough to entice buyers. 'You do have the stimulus plan as far as tax credits back in place. It continues to argue for a slow recovery in the making.' DAVID ADER, HEAD OF GOVERNMENT BOND STRATEGY, CRT CAPITAL GROUP LLC, STAMFORD, CONNECTICUT: 'The sharp gain to existing home sales is certainly bullish news, but with a cloud we'll put over it. First, it's clear that there's ample existing stock to turn over versus new construction so while a good precursor to stability it's a comment on price declines for existing homes and not the GDP building for new homes. Second, related to this, is that fact that lower prices are still at hand and a keen motivator -- or people are buying smaller homes. We suspect that the first-time home credit helped these figures, by the way, so some stimulus impact.' ADAM YORK, ECONOMIST, WELLS FARGO SECURITIES, CHARLOTTE, NORTH CAROLINA: 'Huge jump in sales makes this the best performance since early 2007. Vast majority of gains can be attributed to the originally expected expiration of the first-time home buyer tax credit. Look (Frankfurt: 867225 - news) for a steep payback in either November or December data. Come the first of the year we may see some gains again as the extension/expansion of the credit shows up in the data. Underlying trends will be difficult to find in the next few months as the tax credit distorts activity.' WILLIAM LARKIN, PORTFOLIO MANAGER, CABOT MONEY MANAGEMENT, BOSTON: 'The number is a positive because it means that the tax benefits going into the housing market are working and that's a relief. Everything is about housing and jobs right now.' MARKET REACTION: STOCKS: U.S. stock indexes added to gains. BONDS: U.S. Treasury debt prices were little changed. DOLLAR: U.S. dollar fell against the euro, rose against the yen. Keywords: USA MARKETS/ (Reporting by New York Treasuries Desk; +1-646 223-6300)

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