US: Pending Home Sales Index

Wed Jul 29 09:00:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
Pending Home Sales Index - M/M 1.0% 0.4% to 2.5% -1.8% 0.9% 0.6%
Pending Home Sales Index - Level 110.3 112.6 112.3

In a negative for the summer home-sale outlook, pending sales of existing homes fell a sharp 1.8 percent in June. The low-end Econoday forecast was for a gain of 0.4 percent. The year-on-year rate slowed from the low double digits to plus 8.2 percent, which is very respectable but slightly lower than the trend for final sales of existing homes.

Weakness was centered in the South and the Midwest where year-on-year pending sales are on the soft side, at plus 7.8 percent and 5.0 percent respectively. Both the West and Northeast posted small monthly gains in June with year-on-year sales rates at plus 10.4 percent and with the Northeast, the smallest region for home sales, in the top spot at 12.0 percent.

This report is the latest to take the edge off the housing outlook which had been rising sharply following weakness early in the year. Strength in housing may contribute less than expected to the second-half economy.

Market Consensus Before Announcement
Pending home sales have been sending consistent signals of strength in the existing home sales market. A very solid 1.0 percent gain is expected for June which would follow gains of 0.9 percent in May and 2.7 percent in April.

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.