US: Pending Home Sales Index

Mon Sep 28 09:00:00 CDT 2015

Consensus Consensus Range Actual Previous
Pending Home Sales Index - M/M 0.5% 0.0% to 1.0% -1.4% 0.5%
Pending Home Sales Index - Level 109.4 110.9

The existing home sales market looks to remain flat in the coming months based on the pending home sales index which fell a disappointing 1.4 percent in August. Three of four regions posted declines led by the Northeast at 5.6 percent with the South, which is by far the biggest housing region, down 2.2 percent. Only the West posted a gain, at 1.8 percent.

Existing home sales are being limited by lack of homes on the market which itself, however, reflects softness in home prices and general demand. But there is strength in housing and that's in new home sales and construction. Watch for Case-Shiller home price data on tomorrow's calendar.

Market Consensus Before Announcement
Pending home sales had been on a climb in the first half of the year, correctly signaling a subsequent climb for final sales of existing homes. But the index began to stall going into the summer, this time correctly signaling August's drop in existing home sales. A welcome pop higher of 0.5 percent is expected for the August report, one that would point to a bounce back for existing home sales in September and October

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.