KEY DATA: Sales: +5.1%; 1-Familly: +5.5%; Condo: +1.8%; Prices (Year-over-Year): +5.7%
IN A NUTSHELL: “Home sales rebounded in March, but the lack of inventory is likely to keep gains down for some time to come.â€
WHAT IT MEANS: Housing is dominating the data this week and the mixed results don’t point to a vibrant market. Yesterday, we saw that housing starts were soft, which came on top of a stagnant homebuilders’ confidence. Today’s existing home sales numbers were better than expected, but really not that great. Sales rose in March quite solidly, rebounding from a down February. Single-family activity was somewhat stronger than the condo market. The increases were across the nation, with every region reported a rise in closings. Still, we are below the sales pace posted in December and January and the rise from March 2015 was a modest 1.5%. Condo sales were actually down from last March, though it is not clear why. The big problem remains the supply of homes on the market. There are only about a 4.5 months supply at the current sales pace. That is way too low. With supply low, it is not surprising that price gains remain quite strong.
MARKETS AND FED POLICY IMPLICATIONS: The housing market is doing okay, and I mean just okay. There is some hope that sales may accelerate. Demand for high-priced units was soft in March. That may reflect the uncertainty created by the stock market volatility we saw in January and early February. Since these data reflect closings, it may be a few more months before upscale demand rebounds. With the equity markets coming back nicely, an upturn in the upper end of the market is likely. Until then, we can only forecast a better market and that is something many Fed members are unwilling to bet on. As for the markets, stronger than expected economic data are usually not viewed positively by traders, and this report was a little higher than projected. But it was mixed, so I don’t expect any major reaction to these numbers, especially give it is earnings season.