Instant view: Existing home sales up 7.6 percent in Sept

NEW YORK (Reuters) - Existing home sales rose in August as housing market activity remained severely depressed from levels preceding the country's most severe downturn in modern history.

KEY POINTS: * Sales climbed 7.6 percent to an annual rate of 4.13 million units, the National Association of Realtors said on Thursday. Forecasters in a Reuters poll had been looking for a 8.4 percent increase. * The August sales pace was the second lowest since 1997 after July's revised 3.84 million level, which had posted a record one-month drop after the tax credit ended.

COMMENTS:

PIERRE ELLIS, SENIOR ECONOMIST, DECISION ECONOMICS, NEW YORK:

"It's only a very small rebound from the decline that occurred when the tax credit expired. The tax credit took sales to an artificially high level. Between April and July, sales fell 34 percent and now we're back up 7.5 percent. It's still a very low rate of sales, down 20 percent from a year ago.

"The inventory of unsold homes shrank slightly, but remains high, up nearly 60 percent from what was normal prior to 2005. So supply is still weighing on prices. And the inventory doesn't even include houses in the process of being foreclosed. A lot of sales improvement has to occur before prices do not seem shaky."

HUGH JOHNSON, CHIEF INVESTMENT OFFICER, HUGH JOHNSON ADVISORS

LLC, ALBANY, NY:

"Obviously if you look at both, it's somewhat mixed. Most of us had expected a stronger recovery in existing home sales after the unusually sharp decline in July. But these numbers are hard to forecast from month to month. Of the two releases, my view is the index of leading economic indicators is more important, and as such, on balance, this news is positive. Not only is the index stronger than expected, but we've had now two months in a row of improvement and it seems to suggest the worst may be behind us and the case for a double-dip is not a particularly strong case.

"The bottom line is the case for a double dip is weaker. That's the general take. The economy continues to expand, it has lost momentum, but it is likely to continue to expand over the coming months."

DEAN MAKI, CHIEF U.S. ECONOMIST, BARCLAYS CAPITAL, NEW YORK,

NEW YORK:

"Today's data marked the first stage of stabilization after the drop following the expiration of the tax credits. We expect stabilization to hold in the coming months and to see a gradual improvement in existing home sales. The data was a touch batter than we expected, but broadly in line. We are sill at quite low levels. The tax credits pulled sales forward and now we are in an environment where the underlying trends will be income and employment, which we expect to improve and push existing home sales higher in the coming months."

CHAD MORGANLANDER, PORTFOLIO MANAGER, STIFEL NICOLAUS & CO,

FLORHAM PARK, NEW JERSEY.

"It is in line with expectations but keep in mind that this number is disastrously low. Anyone that would think this is a positive number is woefully confused."

TOM SCHRADER, MANAGING DIRECTOR OF U.S. EQUITY TRADING, STIFEL

NICOLAUS CAPITAL MARKETS, BALTIMORE:

"(Housing data was) a little better than expected, but nothing earth shattering. The market is going to grasp whatever it can for a tidbit of good news. I think a single data point is probably not much (of an influence on stocks). I think the unemployment numbers will overweigh it eventually."

SAM COFFIN, ECONOMIST, UBS SECURITIES, STAMFORD, CONNECTICUT

EXISTING HOME SALES: "It's a reversal after last month's huge decline. It's pretty well spread between single-family and multifamily homes. This is consistent with at least some stabilization and probably a start of a soft recovery in sales. Supporting sales have been low prices and low mortgage rates. We also need labor income growth to continue."

LEADING INDICATORS: "It supports the idea that we are still in a growth environment which was in question a few months ago. We expect growth this year into next year."

CHRISTOPHER LOW, CHIEF ECONOMIST, FTN FINANCIAL, NEW YORK

"I think the right way to put it into perspective is it's a seven-and-a-half percent increase to the second-lowest level ever. It seems like a lot but it's important to put it into the perspective of the 27 percent drop in July.

"The National Association of Realtors does not track distressed sales. Because of that--there is probably more activity than the numbers suggest but at the same time it's at a lower price point.

"The data confirms what we already know, which is the expiration of the first-time homebuyer's tax credit has hurt both new and existing sales."

MICHAEL WOOLFOLK, SENIOR CURRENCY STRATEGIST, BNY MELLON, NEW

YORK:

"The initial headline was modestly better-than-expected, and we got an upward revision to the prior month. It's refreshing to see positive numbers for once in the housing sector. But this doesn't tell us much about the broader outlook for housing, and as for the Fed's next move, things are still data-dependent. In future, we're going to have to watch core CPI very closely, and if it continues to drift lower, the Fed could act, and that would be negative for the dollar."

MARKET REACTION: STOCKS: U.S. stock indexes trimmed losses. BONDS: U.S. Treasury debt prices edged off gains. DOLLAR: U.S. dollar rose against the euro and yen