November’s existing home sales tanked, but at least one analyst says there’s no reason to panic.
Existing home sales in November tumbled 6.1%, the biggest drop since July 2010, down to a seasonally adjusted annual rate of 4.93 million. This was well below analyst expectations of a 1.1% decline, ending five months of 5 million SAAR sales.
“Ignore the usual suspects who will claim that the unexpected 6.1% m/m decline in existing home sales in November is a sign that the housing or wider economic recovery just fell off the rails,” says Paul Ashworth, chief U.S. economist for Capital Economics. “They didn't. Indeed, with employment growth accelerating and mortgage rates falling to 18-month lows, we expect existing home sales to rebound soon. For 2015 as a whole, we expect sales to hit 5,200,000.”
Noting several positives in November’s performance – 300,000 jobs created, consumer confidence at multi-year highs, strong retail sales – he says that the drop in existing home sales to 4,930,000 annualized last month, from what was a 14-month high of 5,250,000 in October, is nothing to be alarmed about.
“Overall, the housing recovery has been a bit weaker than many were hoping for this year, although existing home sales are not far off normal levels, while prices continue to rebound,” Ashworth says. “With mortgage rates starting from very low levels and credit conditions easing, albeit very gradually, the housing recovery should pick up a little more pace in 2015, even as the Fed begins to normalize policy.”
Meanwhile, Sterne Agee Chief Economist Lindsey Piegza is not so nonplussed.
“Last week the Fed maintained its assessment of 'moderate' to describe the economic expansion. This morning's disappointing home sales figures are part of the reason for that more lackluster assessment of the US economy,” she says. “While the Fed is acutely aware of improvements in some sectors of the economy, housing is one that remains slow.’'
Piegza says access to credit and stagnant wage growth continue to be an albatross.
“Despite modest improvements in the labor market, consumers are still struggling with minimal income growth, dilapidated savings and in some cases, limited access to credit,” she says.