US: Existing Home Sales

Mon Jun 22 09:00:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
Existing Home Sales - Level - SAAR 5.250M 5.150M to 5.350M 5.35M 5.04M 5.09M

The housing sector is lifting off, as existing home sales jumped 5.1 percent in May to a 5.35 million annual rate that hits the top end of the Econoday consensus. The year-on-year rate tells the story, at plus 9.2 percent which, outside of March' s 11.9 percent, is the strongest rate in nearly two years. And prices are rising, up 7.9 percent year-on-year at a median $228,700.

In a special sign of strength, sales are strongest for single-family homes, up 5.6 percent in the month to 4.73 million. Year-on-year, single-family sales are up 9.7 percent. Condo sales have been flat in recent reports, up 1.6 percent in May to a 620,000 rate for a year-on-year gain of 5.1 percent. And in yet another special strength, first-time buyers are back in the market, making up 32 percent of all sales vs 27 percent this time last year.

Gains sweep the regional data with the Midwest up 4.1 percent and the West and South up 4.3 percent each. The Northeast rose an outsized 11.3 percent in the month which is also the region's year-on-year rate. Year-on-year, the Midwest is the strongest at 12.4 percent with the West at 9.0 percent and the South up 6.9 percent.

Holding down sales has been a lack of supply which, relative to sales, is at 5.1 month vs 5.2 in April. In another sign of tightness, the median sales time held steady at 40 days. But the rising sales rate together with the rise in prices are certain to bring new homes to the market. And homes are coming onto the market, to 2.29 million vs 2.20 and 2.01 in the prior two readings.

The existing-home side of the housing sector is now joining the new-home side where the next update will be tomorrow morning with new home sales. Housing is emerging as a leader for the economy, helping to offset what has been disappointment from the export hit manufacturing sector.

Market Consensus Before Announcement
Existing home sales have been lagging new home sales but a big bounce is expected for May, to a 5.25 million annual rate vs April's 5.04 million rate. Strength in this report would underscore the fundamental strength of the consumer and could put the housing sector in a leadership position of the economy.

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.