US: Existing Home Sales

Wed Jul 22 09:00:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
Existing Home Sales - Level - SAAR 5.400M 5.300M to 5.460M 5.49M 5.35M 5.32M
Existing Home Sales - M/M Change 3.2% 5.1% 4.5%
Existing Home Sales - Yr/Yr Change 9.6% 9.2%

Existing home sales were very strong in June, up 3.2 percent to a higher-than-expected annual rate of 5.49 million which is the best since the bubble days of February 2007. June's gain is on top of May's revised 4.5 percent jump. Year-on-year, sales are up a very strong 9.6 percent which, pointing to further home-price appreciation ahead, is sizably above the year-on-year 6.5 percent gain for the median price. The median price, up 3.3 percent in the month to $236,400, is already a record.

Part of the rise in prices is tied to a lack of distressed sales, at only 8 percent of June's total which is a record low. Tight supply is another factor driving up prices, at 5.0 months at the current sales rate vs 5.1 and 5.2 months in May and April and against 5.5 months last June. There were 2.30 million existing homes for sale on the market in June.

Regional data underscore the strength, showing solid mid-single digit monthly gains across all readings led in June by the Midwest, up 4.7 percent in the month, with the South showing the smallest gain but at a still very strong 2.3 percent. Year-on-year, price appreciation is strongest in the Midwest, at 12.7 percent, with the South at the rear at plus 7.3 percent.

First-time buyers, however, are not behind the gains in sales, making up a decreasing share of 30 percent of total sales. If this group, which has been depressed since the bubble-burst of 2008, begins to kick, total sales could find a new source of momentum. Watch for new home sales on Friday which are also expected to show a strong gain.

Market Consensus Before Announcement
Existing Home Sales are expected to rise a solid 0.9 percent in June to a 5.40 million rate vs May's 5.35 million rate which was up very strongly from April as springtime housing acceleration took hold. Supply has been tight, at 5.1 months in the May report, which is likely to bring homes into the market. The mix between single-family homes and the less expensive condo category will be of special interest given signs in starts & permit data of a surge underway in condos.

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.