Existing Home Sales Continue to Rise; Fed Minutes Spook Investors

Existing home sales increased 6.5 percent to an annualized rate of 5.39 million units in July from 5.06 million units in June. Although the Fed agreed that "a change in the purchase program was not yet appropriate," all indices were down yesterday, including Dow Jones, S&P and Nasdaq.

The National Association of Realtors reported on Wednesday that U.S. existing home sales increased 6.5 percent to an annualized rate of 5.39 million units in July from 5.06 million units in June. There was also a year-over-year improvement, with sales up 17.2 percent over the 4.6 million-unit pace in July 2012. The organization pegged the national median existing-home price for all housing types at $213,500 in July, a 13.7 percent increase from July 2012.

NAR also said that total housing inventory at the end of July rose 5.6 percent to 2.28 million existing homes available for sale. That represents a 5.1-month supply at the current sales pace, unchanged from June. Listed inventory is 5 percent below a year ago, when there was a 6.3-month supply.

“Mortgage interest rates are at the highest level in two years, pushing some buyers off the sidelines,” NAR chief economist Lawrence Yun said in a statement. “The initial rise in interest rates provided strong incentive for closing deals. However, further rate increases will diminish the pool of eligible buyers.”

Fed Minutes Spook Investors

The Federal Open Market Committee released the minutes of its July 30-31 meeting on Wednesday, and economists, investors, and commentators were looking for hints about QE3, the Fed’s ongoing bond-buying initiative. The Fed said: “While a range of views were expressed regarding the cumulative improvement in the labor market since last fall, almost all Committee members agreed that a change in the purchase program was not yet appropriate.”

“Not yet” as of the end of July. The FOMC minutes weren’t any more specific than that about stepping down purchases in September, which is widely thought to be the central bank’s target month.

The Fed did say that it’s still watching the economy, waiting to see how it unfolds over the rest of the summer. “The unemployment rate had declined considerably since [last fall], and recent gains in payroll employment had been solid,” the minutes said. “However, other measures of labor utilization–including the labor force participation rate and the numbers of discouraged workers and those working part time for economic reasons–suggested more modest improvement, and other indicators of labor demand, such as rates of hiring and quits, remained low.” The central bank is paying attention to more than just the headline numbers, in other words.

Investors decided during the afternoon that they didn’t much care for whatever the Fed had said, though they might not have been sure exactly what that was. In any case, all the indices were down. The Dow Jones Industrial Average lost 105.44 points, or 0.7 percent. The S&P 500 was down 0.58 percent and the Nasdaq was off 0.35 percent.