Home sales dealt more knocks

Home sales dominated the week's economic reports once again. The news on existing-home sales continued to worsen, and even positive numbers on new-home sales had somber tones. A drop in durable-goods orders did nothing to brighten the economic climate. For the week, the S&P 500 Index rose 2.4% to 1,535 (for a year-to-date total return of 9.8%). The yield of the 10-year U.S. Treasury note remained even at 4.41%.

 

Existing-home sales hit lowest level in eight years

Existing-home sales fell to their lowest mark since 1999, sinking 8.0% in September to an annualized 5.04 million units. The drop was slightly worse than expected and brought the annual decline to 19.1%. Slow sales were evident across the country, though the Northeast and West regions were hardest hit. Inventories of single-family homes reached a nearly 20-year high—with the single-family home inventory at 10.2 months and the condo inventory at 12.6 months. Prices also fell, with the median existing-home price down 4.2% in September.

 

New-home sales rebound after August report revised

While existing-home sales were down, new-home sales climbed 4.8% in September to 770,000 annualized units. However, August's numbers were revised downward 8.0% to 735,000 sales. September's sales were slightly off consensus expectations of 775,000. The annualized decline amounts to 23.3%. Most of September's growth occurred in the West, where deep discounting by builders helped fuel a sales spurt. Inventories of new homes in September dropped from 9 months to a seasonally adjusted 8.3 months.

 

Durable-goods orders unexpectedly fall

Orders for durable goods, manufactured items expected to last more than one year, declined 1.7% in September. Analysts had expected orders to rise 1.5%. August orders were adjusted downward, falling to 5.3%. Slumping defense aircraft orders and motor vehicle orders were responsible for much of the decline.

 

The economic week ahead

The Federal Reserve Board's Open Market Committee (FOMC) meets next Wednesday, when Chairman Ben Bernanke and his colleagues will decide whether to change the federal funds rate. A busy week for economic data begins Tuesday with the release of the consumer confidence report. Wednesday brings reports on employment costs, the gross domestic product, and construction spending; while Thursday's schedule features releases on personal income and manufacturing. The week concludes Friday with reports on employment and factory orders.