Wednesday, October 24, 2007

Existing Home Sales Fall During Peak of Credit Crunch

- Existing Home Sales for September fell to 5.04M versus estimates of 5.25M and 5.48M in August.

BOTTOM LINE: Sales of previously owned US homes fell more than forecast in September, Bloomberg reported. The median existing home price fell 4.2% to $211,700, compared with September 2006. The number of homes for sale at the end of the month rose to 4.4 million or 10.5 months’ supply at the current sales pace, up from 9.6 months in August. I expect sales to improve a bit this month as the fears of the credit turmoil peaked in September. The odds of a 25 basis points rate cut at the upcoming Fed meeting are now 86% and a 50 basis point cut 14%, according to fed fund futures. Given the Fed’s recent silence, as expectations for a cut have soared, I now think another cut is likely at month’s end. I continue to believe the significant economic drag from housing, combined with booming global growth, will produce US economic growth of around 2-2.5% over the intermediate-term, which is perfect for many US growth stocks. Growth closer to 3% is likely for 3Q, which is released next week.

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