US: Existing Home Sales

Fri Jan 23 09:00:00 CST 2015

Consensus Consensus Range Actual Previous Revised
Existing Home Sales - Level - SAAR 5.050M 4.930M to 5.120M 5.040M 4.930M 4.920M
Existing Home Sales - M/M Change 2.4% -6.1% -6.3%

Existing home sales popped up in December as expected, up 2.4 percent to an annual sales rate of 5.04 million vs a slightly revised 6.3 percent decline in November to 4.92 million. December's gain, underscoring Wednesday's housing starts report, was led by single-family homes which rose 3.5 percent to a 4.47 million rate. Condos declined 5.0 percent in the month to a 570,000 rate. The gain for single-family homes is an important signal of strength for first-time home buyers.

The gain in sales drew down available homes on the market to 1.85 million from 2.08 million, in turn sharply lowering supply on the market to 4.4 months from 5.1 months. Lower supply points to sales troubles in next month's report.

A plus in the report, and underscoring strength in yesterday's FHFA price report, is a 1.1 percent gain in the median price to $209,500. Year-on-year, the median price is up 6.0 percent in a reading that also points to building strength in the housing sector.

On net, this is a solid report though seasonal factors do play an unusually large role in readings during the winter. Next report on housing will be Tuesday with the new home sales report.

Market Consensus Before Announcement
Existing home sales had been showing some life but not in November, sinking a very steep 6.1 percent to a 4.93 million annual rate which was below the low end of the Econoday consensus (4.97 million to 5.35 million). November, a month when the nation's weather proved mostly mild and which should have given a boost to sales, ended 5 straight months of plus 5.0 million rates. November's weakness was broad based with all 4 regions showing single digit monthly declines. But the good news is that the weakness in sales is not inflating supply which, due to a draw down of homes on the market to 2.09 million from 2.24 million, held steady relative to sales, at 5.1 months.

Existing home sales tally the number of previously constructed homes, condominiums and co-ops in which a sale closed during the month. Existing homes (also known as home resales) account for a larger share of the market than new homes and indicate housing market trends. (National Association of Realtors)

This provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as home resales, investors can gain specific investment ideas as well as broad guidance for managing a portfolio.

Even though home resales don't always create new output, once the home is sold, it generates revenues for the realtor. It brings a myriad of consumption opportunities for the buyer.

Refrigerators, washers, dryers and furniture are just a few items home buyers might purchase. The economic "ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month. Since the economic backdrop is the most pervasive influence on financial markets, home resales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the existing home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.