Despite the ongoing turmoil in the credit and housing markets, sales of preowned homes have held up surprisingly well over the past year, especially compared with sales of new homes.
Since the beginning of the year, sales of existing homes essentially have been unchanged, while those for new ones are down about 25%.
Economists expect that decoupling to continue in the September data. They expect sales of existing homes to dip about 1% to a seasonally adjusted annual rate of 4.86 million from 4.91 million in August. See Economic Calendar.
The shift toward sales of older homes isn’t a surprise. Builders have been cutting back the supply of new homes on the market, while the record level of foreclosures has boosted the supply of older properties on the market.
The pending home-sales index, also released by the National Association of Realtors, rose 7.4% in August. This index, smoothed over the past six months, is the best predictor of the existing-home sales report, according to economists for Barclays Capital, who are predicting a 4% bounce in sales to 5.10 million.
The impact of the late-September credit crunch should be minor, economists said, because the sales figures for September represent the closing of sales contracts signed in August or even July, when credit conditions were a bit more favorable.
However, the credit squeeze could show up in sharply lower sales in October.
The economic calendar is extremely light in the coming week. Aside from the housing sales numbers, the only other monthly number is the index of leading indicators, which is expected to fall 0.1% despite the massive increase in the money supply. But other factors — stock prices, jobless claims and building permits — point to another decline, according to economists.
Federal Reserve Chairman Ben Bernanke will testify at the House Budget Committee on Monday.
Congress is looking at proposals for another fiscal-stimulus program that could be enacted just after the election in a lame-duck session, or more likely in early January. Democrats are talking about extending unemployment benefits, and funneling more money to state and local governments to balance their budgets, along with possibly boosting infrastructure investments. Temporary tax cuts or rebates could also be part of the mix.
Bernanke, who endorsed the first stimulus last spring, isn’t likely to give the Democrats too much encouragement. This past week, he said fiscal stimulus was not a major factor in bringing the economy out of the Great Depression in the 1930s, despite Herculean attempts. That said, he did admit that “monetary policy ultimately cannot always solve the problems; sometimes you do need some fiscal and financial intervention and we are doing that currently.”