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Existing home sales

Existing home sales have plunged in recent months, but mainly because of the anticipated expiration of the homebuyer tax credit in November, which caused many to accelerate their purchases into October. Now that it has been extended, the pace of sales has settled back down, and may be returning to "normal." I note that the inventory of homes for sale has declined by 27% since its peak, as shown in the next chart, while sales activity has been relatively stable. This doesn't look to me like a market that is collapsing or off balance. And with inventories down, there is room for the market to absorb new foreclosures.

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