US: Pending Home Sales Index

Mon Jun 29 09:00:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
Pending Home Sales Index - M/M 0.6% 0.0% to 3.0% 0.9% 3.4% 2.7%
Pending Home Sales Index - Level 112.6 112.4 111.6

Solid momentum is building inside the housing market based on the ongoing run of very strong data including today's pending home sales index which is up a better-than-expected 0.9 percent in the May report which tops Econoday expectations for a 0.6 percent gain. The index level, at 112.6, is as high as it's been since the bubble days of 2006.

Sales have been very strong in the West where pending sales rose 2.2 percent in May for a 13.0 percent year-on-year gain. Pending sales in the South, up 10.6 percent year-on-year, have also been strong though the region did dip 0.8 percent in the latest month. Sales also dipped in the Midwest, down 0.6 percent for a year-on-year plus 7.8 percent, but they rose sharply in the Northeast where housing after a heavy winter is bouncing back strongly, up 6.3 percent in this report for a year-on-year again of 10.6 percent.

Today's report points to further strength for the existing home sales report which surged in data posted last week. Housing is getting a boost from the strong jobs market together perhaps with the prospect of rising mortgage rates which may be pushing buyers into the market. Watch for Case-Shiller home price data on tomorrow's calendar.

Market Consensus Before Announcement
Pending home sales are expected to offer a leading indication of building strength for the housing sector, specifically final sales of existing homes which last week showed strong gains for May. A fifth straight gain is expected for pending sales, at a very solid plus 0.6 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.