US: Pending Home Sales Index

Fri Feb 27 09:00:00 CST 2015

Consensus Consensus Range Actual Previous Revised
Pending Home Sales Index - M/M 2.0% 0.0% to 6.0% 1.7% -3.7% -1.5%
Pending Home Sales Index - Level 104.2 100.7 102.5

Pending home sales rose 1.7 percent in January to 104.2, pointing to moderate strength ahead for final sales of existing homes. The regional breakdown shows gains in the two most closely watched regions, the South at 3.2 percent and the West at 2.2 percent. The Northeast is little changed at plus 0.1 percent while the Midwest fell slightly, down 0.7 percent. Today's report rounds out a very busy week for housing data, a week that proved mixed with Monday's existing home sales report weak in contrast to price reports from Case-Shiller and FHFA which showed strength.

Market Consensus Before Announcement
The pending home sales index fell a very steep 3.7 percent in December after rising 0.6 percent the month before. A decline was not expected at all with the result far underneath the Econoday low estimate for plus 0.3 percent. All regions showed single digit declines in the month including the two most closely watched regions, the South (down 2.6 percent) and the West (down 4.6 percent).

The National Association of Realtors developed the pending home sales index as a leading indicator of housing activity. Specifically, it is a leading indicator of existing home sales, not new home sales. A pending sale is one in which a contract was signed, but not yet closed. It usually takes four to six weeks to close a contracted sale.

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 the pending home sales index which measures 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.

The National Association of Realtors moved up its publication schedule in 2011. Prior to 2011, the reference month was two months trailing the release date. In 2011, the reference month trails only by one month to the release month.