US: Pending Home Sales Index

Wed Apr 29 09:00:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
Pending Home Sales Index - M/M 1.0% -1.4% to 3.5% 1.1% 3.1% 3.6%
Pending Home Sales Index - Level 108.6 106.9 107.4

Pending home sales are up for a 3rd straight month, 1.1 percent higher which is right at the Econoday consensus for a 1.0 percent gain. This points to what would be a very welcome 3rd straight gain for final sales of existing home which surged 6.1 percent in the last report which was for March.

Strength in today's pending sales data is centered in the largest housing region which is the South where sales jumped 4.0 percent for a year-on-year gain of 12.4 percent. Sales in the West rose 1.7 percent in the month for a year-on-year plus 15.6 percent. The year-on-year rate for pending sales in all regions is 11.1 percent.

A pick up in the existing home market is hopefully signaling improvement for the new home market which remains weak, underscored by steep declines in the last housing starts & permits report as well as the last new home sales report.

Market Consensus Before Announcement
The pending home sales index picked up steam in February, up a much stronger-than-expected 3.1 percent on top of a 1.2 percent revised gain in January. This is the first back-to-back gain since April and May last year. Today's report is a second shot in the arm for the ever-lagging housing sector, following last week's big surge in new homes sales. Year-on-year, pending home sales, which are defined as contract signings for existing homes, are up a robust-looking 12.0 percent which is a 6th straight increase. But this is misleading as many deals fall through. Final sales of existing homes, in data posted last week, are up only 4.7 percent year-on-year.

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.