US: Existing Home Sales

Wed Apr 22 09:00:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
Existing Home Sales - Level - SAAR 5.045M 4.850M to 5.200M 5.190M 4.88M 4.890M
Existing Home Sales - M/M Change 6.1% 1.2% 1.5%
Existing Home Sales - Yr/Yr Change 10.4% 4.7%

This winter's heavy weather may very well have held down the housing market which appears to be heading into the spring with new momentum. Existing home sales surged 6.1 percent in March to a 5.190 million annual rate. This is near high-end expectations and the best rate since September 2013. In percentage terms, the 6.1 percent gain is the strongest since December 2010 and among the very highest in the 16-year history of the series.

Sales of single-family homes jumped 5.5 percent in the month to a 4.590 million rate while condos really jumped, up 11.1 percent to a 600,000 rate. All regions show solid gains in total sales led by the Midwest at 10.1 percent with the South at the rear, though still up a solid 3.8 percent.

Price data all show strength with the median price up a very strong 5.1 percent to $212,100. Year-on-year, the median is up 7.8 percent for the best reading since February last year. This is a bit below the year-on-year sales rate of 10.4 percent which hints at further pricing power ahead.

The improvement in prices will help bring more homes into the market which should be a plus for future sales. More homes did enter the market in March, to 2.0 million vs 1.9 million in February, but inventory relative to sales still remains tight, at 4.6 months vs 4.7 months in the prior month.

A solid jobs market and low rates are big pluses for the housing market, and mortgage application data are coming to life in the most recent data for April released earlier this morning. On tomorrow's calendar, watch for new home sales which posted a similar surge in the last report for February.

Market Consensus Before Announcement
Existing home sales bounced 1.2 percent higher in February to a 4.88 million annual pace which was above January's 4.82 million but still was not that strong. The year, in fact, opened with the two weakest months for existing home sales since April last year. The year-on-year rate, however, was showing moderate strength, at plus 4.7 percent in February for the strongest reading since October 2013. Supply was still limiting sales. Existing homes on the market were still on the scarce side, at 4.6 months of supply and unchanged from January. A year ago, the rate was 4.9 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.