After a quiet August, U.S. homebuyers step up their game in September

Existing home sales rose by 4.7% m/m in September, increasing to 5.55 million units (annualized). September's gain has nearly reversed the 5% decline experienced during the prior month, and was handsomely above the consensus forecast, which called for a more modest rise of 1.5% to 5.39 million units.

The single-family segment was responsible for all of the gain with sales rising by 5.3% to 4.93 million units, a level only 0.02 million shy of its cyclical high reached in July. Meanwhile, after two consecutive monthly declines sales of condos and co-ops remained flat on the month.

On a year-over-year basis, home prices were up by 6.1% - an acceleration from the last month's reading of 4.6% y/y. Prices in the single family segment were up 6.6% y/y, while prices for condo and co-op prices advanced more slowly (+1.9% y/y). 

The share of distressed home sales remained unchanged in September at 7%, but remains 3 percentage points (pp) lower than a year ago. Sales to investors (+1pp) and cash sales (+2pp) both ticked up on the month rising to 13% and 22%, respectively.

First-time home buyers accounted for 29% of the transactions in September, which is 3pp lower than the month prior but unchanged relative to the share seen a year ago.

The inventory of unsold homes - measured in months' supply - edged lower to 4.8 months in September from 5.1 a month earlier. 

In terms of the regional breakdown, sales were higher across the board. Northeast (+8.6% m/m) and West (+6.7% m/m) led the way, with more modest gains seen in the South (+3.8% m/m) and Midwest (+2.3% m/m). 

After taking a breather (or a vacation) in August, U.S. homebuyers were back to the market in full force in September, with sales coming in within a hair of their cyclical high reached in July. As such, this morning's report was a nice data surprise, suggesting that the significant pullback in activity in August was more of a monthly hiccup rather than a beginning of a weakening trend.

It is particularly encouraging that all of the gains were in the single-family segment, which is less volatile and accounts for the bulk of the existing homes market. Meanwhile, sales of condos and co-ops continued to underperform for the third straight month. Low inventory and high demand have been boosting prices for condos in many large urban markets, such as Boston and New York, and reduced affordability appears to be beginning to weigh on sales.

"With today's report we now have the third quarter results for U.S. existing home sales. Compared to a quarter earlier, sales rose by 3.4% in Q3, and were up 8.3% relative to the year ago. Boosted by ongoing improvements in the labor market, low interest rates and rising rents, the resale housing market should continue making headway next quarter as well, and looks well-positioned to lock in solid gains for the year as a whole. This in turn should provide a welcome impetus to residential investment and GDP growth in the second half of 2015", says TD Economics.