Existing Home Sales Drop

Housing demand is flat at the very best with demand for resales clearly going into reverse. Sales of existing homes fell 3.4 percent in September to a 5.150 million annualized rate that misses, not only Econoday's consensus for the sixth straight month, but the low end of Econoday's consensus range. September's result is the lowest rate in nearly three years, since November 2015.

Hurricane Florence which hit the Carolinas at mid-month didn't help as September sales in the South fell 5.4 percent. Yet sales in the Midwest were nearly as weak, down 3.6 percent with sales in the Northeast down 2.9 percent. The Midwest did the best in September -- at no change.

All this weakness came about despite price discounting by sellers. The median sales price for an existing home fell 2.8 percent in the month to $258,100. And a comparison of year-on-year rates, at plus 4.2 percent for prices, with the sales rate, at minus 4.1 percent, suggests that prices have further down to go.

The weakness in sales along with the weakness in prices, not to mention a lack of interest in new homes, are not encouraging sellers to put their homes on the market. The number of resales on the market fell 1.6 percent in the month to 1.880 million though relative to sales, given how low sales are, supply actually improved, to 4.4 months from 4.3 months in August.

Rising mortgage rates, now over 5 percent for 30-year fixed loans, are not helping the housing market, though the enormous strength of the labor market and the stock market along with very strong consumer confidence should all be positives for home sales. The lack of wage gains, however, is a negative for home buyers not to mention a great mystery of the 2018 economy given the increasing scarcity of available labor. And another great mystery of this year's economy is the lack of interest in home ownership.