Stronger-than expected increase in October home sales - Nomura

Analysts at Nomura noted that Existing home sales rose 2.0% m-o-m in October to an annualized rate of 5.48mn, above expectations (Nomura: -0.7% to 5.35mn, Consensus: +0.2% to 5.40mn), with decent gains in both single- and multi-family home sales. Sales were revised down to a 0.4% increase in September (previously reported as a 0.7% increase). 

Key Quotes:

"The stronger-than expected increase in October sales was driven by a decent rebound in sales in the South, which increased 1.9% m-o-m. Sales in other regions rose decently as well. We expect sales in the affected regions to recover from the adverse impact from the recent hurricanes over the near term. The median existing-home price for all housing types continued to increase, likely further weakening home affordability and consumers’ assessment of home buying conditions. 

Moreover, strong demand in the month lowered unsold inventories to a months’ supply of 3.9 at the current sales pace. Continued softness in homes on the market and months’ supply indicator suggest that demand will continue to outstrip available units for sale over the near- to medium term, adding some headwinds to future sales. The strong increase in existing home sales could prove transitory as pending home sales, upstream contract signings which typically lead existing sales by a month or two, remained weak in August and September. However, the transitory effects from recent hurricanes seem to have fully faded from existing home sales data as the gradual recovery in affected regions continues. 

GDP tracking update: October existing home sales were stronger than we expected, suggesting that brokers’ commissions, a component of residential investment, may have been stronger in Q4. After rounding, we raised our tracking estimate of Q4 real GDP growth by 0.1pp to 2.5% q-o-q saar."