US: Pending Home Sales Index


Wed Dec 30 09:00:00 CST 2015

Consensus Consensus Range Actual Previous
Pending Home Sales Index - M/M 0.5% 0.0% to 2.4% -0.9% 0.2%
Pending Home Sales Index - Level 106.9 107.7

Highlights
Pending home sales in November declined for the third time in four months as buyers continue to battle both rising home prices and limited homes available for sale. The pending home sales index was down 0.9 percent but up 2.7 percent from a year ago. Modest gains in the Midwest and South were offset by larger declines in the Northeast and West.

November's dip continued the modestly slowing trend seen ever since pending sales peaked to an over nine year high back in May. NAR said that home prices rose too sharply in several markets, there were mixed signs of an economy losing momentum and waning supply levels all contributed to headwinds in recent months despite low mortgage rates and solid job gains.

The Northeast decreased 3.0 percent but is still 4.3 percent above a year ago. In the Midwest the index rose 1.0 percent and and is now 4.1 percent above November 2014. Pending home sales in the South increased 1.3 percent and are 0.5 percent higher than last November. The index in the West declined 5.5 percent but remains 4.5 percent above a year ago.

Market Consensus Before Announcement
Pending home sales are expected to rise a solid 0.5 percent in November vs a softer 0.2 percent rise in October. The expected gain would point to a badly increase for final sales of existing homes which were depressed in November by new disclosure rules and related time delays.

Definition
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.

Description
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.