Most of the media soft-pedaled the news on existing home sales for August. They were down 4.3 percent from July and are now down more than 20 percent from the year-round average for 2005. It would have been useful to remind readers that the August sales numbers refer to closings. The contracts on these houses were mostly signed in June and July, before the big flare-ups in the mortgage market. The data on new home sales on Friday will give us first look at how the housing market looks post flare-up. With prices already falling at double-digit annual rates in many areas, it is hard to see things getting better with record inventories of unsold homes and tightening credit. A sharp drop in the consumer confidence index also is not encouraging. Most of the drop was in the current conditions index, which does near some relationship to current consumption. The expectations index is far more volatile and therefore essentially worthless as a predictor of economic behavior. The NYT did manage to find one optimist. Tom Kunz, president of Century 21, said, “if I have a job, and I have income, and I have a good credit rating, I can buy a house today.”
--Dean Baker
