Existing home sales bring (some) good news for the U.S. economy

01/24/2011 3:00 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com



I missed reporting on this piece of economic good news last week. And it’s an important piece of data since it feeds into my belief that the U.S. economy is strengthening and that the U.S. market is the place to be in the first half of 2011.

Existing home sales for December came in at an annualized 5.28 million. That was a big pick up from the 4.7 million annualized rate in November. Economists were expecting sales at an annualized rate of 4.8 million.

I wouldn’t bet the college money (well, not all of it, anyway) on this number—after all just a couple of days ago, on January 19, we got lower than expected numbers on housing starts for December. At the time some analysts blamed the disappointment on worse than normal December weather. Well, maybe.

Existing home sales have now climbed for three straight months and December sales were the strongest since August 2007—if you throw out the months when the federal government gave subsidies to homebuyers.

There’s good news and bad news in the numbers going forward.

The good news is that the median sales price fell to $168,000 in December from $170,200 in November. That’s the lowest median price since February. Cheaper houses, although not good for sellers, does increase the number of people who can afford to buy.

The bad news is that mortgage purchase applications have dropped by almost 9% since the end of November. That suggests that existing home sales will drop back in January.

Related Articles on STOCKS