At 10 a.m. Eastern, the National Association of Realtors released its report on existing home sales for July. The numbers, as they like to say, surprised on the upside. Existing home sales rose to their highest level in two years, recording a seasonally adjusted 7.2 percent month-to-month jump (the largest monthly gain in a decade) and a 5 percent boost compared with July 2008.
U.S. stock market investors, already encouraged by rosy economic reports from Europe, could not restrain their euphoria. The Dow Jones Industrial Average jumped more than 100 points in the first 15 minutes after the report was released.
No question, the numbers are big -- existing home sales have now risen four months in a row, and growth appears to be accelerating. If Americans are buying cars (with a little help from the government) and houses, how long can it be before economic recovery really gets going, even in the face of continuing job losses and consumer retrenchment?
But there are some points of caution. As noted by Barry Ritholtz at The Big Picture, sales usually grow quickly in the summer. The median price for existing home sales was 15 percent lower than in July 2008, further encouraging buyers, but not exactly signaling a "bottom." Thirty-one percent of all sales fall into the category of distressed -- either short sales or foreclosure-driven, and there's more where that came from. And another 30 percent of sales were accounted for by first-time buyers lured by tax credits and representing long-pent-up demand, creating a "frenzy" that Calculated Risk declares unsustainable.