US: Existing Home Sales

Mon Mar 23 09:00:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
Existing Home Sales - Level - SAAR 4.940M 4.650M to 5.050M 4.88M 4.82M 4.82M
Existing Home Sales - M/M Change 1.2% -4.9% -4.9%
Existing Home Sales - Yr/Yr Change 4.7% 3.2%

Existing home sales bounced 1.2 percent higher in February to a 4.88 million annual pace which is above January's 4.82 million but still isn't that strong. The year, in fact, opens with the two weakest months for existing home sales since April last year. The year-on-year rate, however, is showing strength, at plus 4.7 percent in February for the strongest reading since October 2013.

The data are split between single-family homes and condos with the single-family component in front which is encouraging, up 1.4 percent to a 4.10 million pace and a year-on-year gain of 5.9 percent. The condo component was unchanged in February at 0.540 million for a year-on-year minus 3.6 percent.

The South is by far the largest region for total sales and rose 1.9 percent in February for a year-on-year plus 6.0 percent. The West and Midwest are the next largest regions with the Midwest unchanged in the month and up 4.9 percent year-on-year with the West up 1.9 percent in February for a year-on-year gain of 2.8 percent. February sales fell 6.5 percent in the Northeast, which lags in the distance in size. The year-on-year rate for the Northeast is plus 3.6 percent.

Existing homes on the market are still on the scarce side, at 4.6 months of supply and unchanged from January. A year ago, the rate was 4.9 months. Prices firmed in the latest report, up 2.5 percent to a median $202,600 and a respectable 7.5 percent ahead of a year ago. Note, however, that price data in this report are subject to volatility. Still the year-on-year reading is the best since February last year.

The housing market is soft though there are some signs of life in this report including the month's gain for single-family sales. New home sales, like sales of existing homes, have also been soft and a decline is expected in tomorrow's data.

Market Consensus Before Announcement
Existing home sales in January fell a very steep 4.9 percent to an annual rate of 4.82 million which is the lowest rate since April last year. All regions showed single-digit declines with the West the deepest, at minus 7.1 percent. Declines hit both single-family homes, at minus 5.1 percent, and condos, at minus 3.5 percent. Price concessions didn't help the month's sales with the median down 4.1 percent to $199,600. This is the first reading below $200,000 since March last year. The drop in sales made for a sizable rise in inventory relative to sales, to 4.7 months vs December's 4.4 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.