- Joel Naroff, chief economist at Naroff Economic Advisors
Sales of existing homes in the US dropped last month from the second highest level since 2007 as a persistent shortage of properties limited momentum in residential real estate. Nevertheless, the housing market remains on a solid footing, with sales for the whole year set for the best performance in eight years. Thus, housing is expected to take up some of the slack from a chronically sluggish manufacturing sector. US home resales declined by 3.4% to an annualized rate of 5.36 million units in October, against economists' expectations of 5.4 million and down from September's 5.55 million. At the same time the median price of an existing home advanced 5.8% from October 2014 to $219,600 amid tight inventories. The number of previously owned homes for sale fell 2.3% last month from September to 2.14 million, the fewest since March. The weak sales came on heels of data showing a decrease in housing starts in October and a decline in confidence among home builders.
Meanwhile, Fed Chair Janet Yellen defended the central bank's low-rate policies, arguing for gradual rate normalization. While the timing of the first rate hike seems settled, the question remains how fast the Fed will be raising rates. Goldman Sachs predicts the Fed to hike four times next year, raising the federal funds rate by 100 basis points.
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