US: Pending Home Sales Index

Mon Mar 28 09:00:00 CDT 2016

Consensus Consensus Range Actual Previous Revised
Pending Home Sales Index - M/M 1.5% 0.5% to 2.0% 3.5% -2.5% -3.0%
Pending Home Sales Index - Level 109.1 106.0 105.4

A surge in the Midwest fed a very promising and stronger-than-expected 3.5 percent rise in pending home sales for February. Pending sales in the Midwest rose 11.4 percent with monthly sales also up in the South and West. The jump in the Midwest mirrors a February jump in the West on the new home side, in what are perhaps initial signs of isolated life in what has been a dormant housing sector of late. Today's report points to a badly needed bounce ahead for final sales of existing homes which, in previously released data for February, plunged 7.1 percent.

Market Consensus Before Announcement
Existing home sales have been very soft this year, as correctly indicated in advance by weak readings for pending home sales. This report for February is expected to rise 1.5 percent boosted by an easy comparison with January's unexpected 2.5 percent drop. Home-price appreciation has been no better than moderate and has not been enough to attract supply in the market which has remained very thin in what is another factor keeping sales down.

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.