Existing home sales take off

From the September existing home sales report:

• Existing home sales jumped 9.4% to a seasonally adjusted annual rate of 5.57 million units from 5.09 million in August. That was the highest since July 2007.
• Single-family home sales gained 9.4%, while condo and cooperative sales rose 9.7%. By region, sales climbed across the board. They were up 4.4% in the Northeast, 9% in the South, 9.6% in the Midwest, and 13% in the West.
• The raw number of homes for sale dropped 7.5% to 3.63 million units from 3.924 million in August. Supply was down 15% from a year earlier. The months supply at current sales pace indicator of inventory dropped to 7.8 from 9.3. Single family inventory dropped to 7.6 from 9, while condo inventory fell to 11 from 12.1.
• The median price of an existing home fell 1.4% to $174,900 from $177,300 in August, down 8.5% from $191,400 a year ago.

Of course, there are logical reasons for the increase. Soon the tax credit will expire, and that combined with stabilization in the broader economy and cheap home prices drove sales to the highest level since 2007. The overall supply of used homes for sale is also steadily declining, an encouraging trend considering that new home inventory has already dropped steadily. Of course, there is some concern about the lag effect. Clearly, some buyers purchased a home this summer because of the tax credit. Unless that credit is extended or expanded, we’ll see a slight reversal in the coming couple of months. I don’t think it derails the overall recovery, but it will be noticeable.