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So what can we learn from today's existing home sales numbers?

The first thing is that the demand for single-family homes is still enormous, despite more than a year of booming sales. Existing home sales were up seven percent compared with a year earlier. The median price of a previously-owned home was 13.3 percent higher than a year ago

It's worth remembering that this is an abnormal return on an investment in a house. Over time, housing tracks the growth of the economy and the rise in prices generally. So double-digit gains are not sustainable and typically are a sign that people have decided they are underinvested in housing.

To put it another way, when you have double-digit gains in home prices followed by double-digit gains a year later, which is what we're seeing now, you should expect the housing market to start to slow down. And, indeed, that's what is happening. The year-over-year price gains are falling each month. That's a sign of healthy stabilization.

One thing that has been largely overlooked in the better-than-expected September home sales is the connection to the worse-than-expected starts number. Normally, rising sales in existing home sales should feed into rising starts. Builders see a high level of demand for houses, and so they build more. But we're living in an age of supply chain crisis, and so builders are reluctant to pay up for materials and labor.

That matters for the economy. It means that rising home prices and rising home sales do not necessarily translate into economic growth. Selling a home that was built 10 years ago doesn't add to GDP. Building a home does. Supply chain disruptions slow growth.

– Alex Marlow & John Carney
Breitbart News Network