Yesterday was a busy day for telegraphing and spin. Two of the more significant economic announcements fell on the same day. The Federal Open Market Committee released their position on short term rates and changed their positioning somewhat hawkish. The National Association of Realtors released their existing home sale stats which accounts for more than 85% of all home sales (but is somewhat behind the curve since it is based on closed sales). It includes median sales price, the number of sales and inventory.
The Federal Reserve did what the investors anticipated and held rates firm [WaPo] at yesterday’s FOMC meeting. They expressed concerns about inflation but since the housing market has seen a drop off in activity prices, more than they anticipated (see, I told you). It had the effect of slowing down the remainder of the economy, keeping inflation in check, or it least at a level they can tolerate for now [REJ]. It seems to me that the economy will continue to slip and the Fed is telegraphing an inflation concern to avoid having to commit to an immediate rate increase. It has the same desired effect.
Since the summer time, the Fed has been juggling competing concerns of rising inflation and slowing growth. Core inflation rose to 2.9% in September, the highest in a decade and well above the 2% level many Fed officials have said they are comfortable with. Although inflation by the Fed’s preferred index is lower, officials still want to see it drop back to 2% over the next few years.
At the same time, falling housing activity and automobile sales are denting growth; it’s expected to have fallen to an annual rate of about 2% in the third quarter.
The NAR reported that the number of existing home sales dropped for the 6th straight month [USA Today]. The annualized rate of decline was 14.2% in the number of sales, 1.9% below last month. Median sales price dropped 2.2% over the past year, the second month of declines.
public relations personnel economists with NAR spin that the bottom is near but don’t provide a reason why. It certainly may be but they don’t give any insight from their stats about this. Presumably as prices stabilize, buyers on the sidelines will jump back in. One encouraging sign is that inventory has fallen for 2 consecutive months – thats the only stat provided that would suggest the market is bottoming out.
However, inventory is up 35.1% from last year at this time. Since the number of sales fell sharply and prices weakened this month, where is the good news?
I loath to get dizzy.