US: Pending Home Sales Index

Wed Apr 27 09:00:00 CDT 2016

Consensus Consensus Range Actual Previous Revised
Pending Home Sales Index - M/M 0.5% 0.0% to 2.7% 1.4% 3.5% 3.4%
Pending Home Sales Index - Level 110.5 109.1 109.0

Growth in the housing sector this year has been mostly soft though today's pending home sales report does hint at greater strength ahead. The pending home sales index, which tracks contract signing for existing home sales, rose a higher-than-expected 1.4 percent in the March report. Yet the year-on-year rate is showing very little improvement, also at plus 1.4 percent.

Pending home sales surged in the Midwest during February but slowed to only plus 0.2 percent in March. Strength in the latest report is centered in the Northeast and also the South, up 3.2 and 3.0 percent respectively. Year-on-year, the Northeast, which is the smallest region for housing sales, is up 18.4 percent with the Midwest up 4.0 percent.

Existing home sales did show life in March as indicated by this report's February data with today's data pointing to further improvement. Still, sales data show little momentum going into the Spring selling season.

Market Consensus Before Announcement
Existing home sales have been very soft but improving, as consistently indicated in advance by the pending home sales report. This report for March is expected to rise a solid 0.5 percent in what would be a second straight positive showing. Still, sales trends have been soft, reflecting no better than moderate price appreciation which has not been strong enough to attract new supply into the market.

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.