US Existing Home Sales Climb While Falling Short of Expectations

US existing home sales data in May rose to a seven month high at 4.77 million annually from a revised down 4.66 million in April. Economists polled by Bloomberg had expected the figure to rise to 4.82 million. Meanwhile, the lagging house price index fell slightly in April by 0.1% while the previous release was revised down to a 1.4% contraction. Despite a decline in prices for April, median and average price for homes gained noticeably in May to the highest levels since December. Median price climbed 3.84% to $173,000 from $166,600 while average price moved higher by 3.26% to $215,600 from $208,800. Looking deeper into the data, sales of condos/co-ops increased by 6.1% while single family homes lagged behind with a 1.9% gain. The supply of homes also fell slightly to 9.6 months from a previous 10.1 months in April as inventory of homes for sale fell 3.5%. While there are clear signs the housing market may be forming a bottom, several regions remain in a considerable downturn. The west region saw its median price 30.6% lower than a year ago while the national figure shows a 16.8% drop.

Reacting on the news, US markets shifted into the red following a slightly higher open after yesterdays sharp decline. On the currency front, risk appetite appears to be returning as euro gained nearly two hundred pips today before pulling off its high of 1.4038 by around 40 pips. Looking ahead, markets appear to be in a corrective state as news and indicators releases do not seem to contain the necessary improvement to warrant sharp market rallies since March. Furthermore, rising treasury yields, which touched above four percent on the 10-year bond two weeks ago, have caused increases in mortgage rates that have led to sharp declines in refinancing. Recent improvements in housing may be short lived although possible action by the Federal Reserve at the conclusion of the FOMC meeting tomorrow may help prevent downside.