US: Existing Home Sales

Thu Oct 20 09:00:00 CDT 2016

Consensus Consensus Range Actual Previous Revised
Existing Home Sales - Level - SAAR 5.350M 5.250M to 5.450M 5.470M 5.33M 5.300M
Existing Home Sales - M/M Change 3.2% -0.9% -1.5%
Existing Home Sales - Yr/Yr Change 0.6% 0.8%

Existing home sales surged 3.2 percent in September to a 5.470 million annualized rate that exceeds Econoday's high estimate. The key single-family component leads the report, up 4.1 percent to a 4.860 million rate while condos, where choices are limited and permits for new building are on the rise, fell 3.2 percent to a 610,000 rate.

Home owners have been reluctant to put their homes on the market though supply did rise in the month to 2.040 million from 2.010 million. But supply on a monthly basis, given the rise in sales, fell to 4.5 months from 4.6 months.

Prices have not been firm which helps explain both the lack of supply and also the rise in sales. The median fell 2.4 percent in the month to $234,200 though year-on-year appreciation remains on trend at plus 5.6 percent.

Other important details include a record low for distressed sales, at 4 percent of all transactions, and a solid 34 percent showing for first-time buyers which points to rising traffic and likely reflects the rising cost of rentals.

Regionally, September sales were strongest in the West, up 5.0 percent for a year-on-year gain of 1.6 percent, and in the Midwest, up 3.9 percent on the month for a year-on-year plus 2.3 percent. Total year-on-year resales are up but only fractionally, at plus 0.6 percent.

The new home market has been accelerating strongly and may now be lifting the resale market. Though price appreciation is no better than the 5 percent area, housing is in fact a leading strength for the consumer.

Market Consensus Before Announcement
Existing home sales have not been showing the strength of new home sales and forecasters see little change for September, at a consensus 5.350 million annualized rate in what would only be a 0.4 percent gain. And the consensus may even be optimistic given what was a 2.4 percent drop in the pending home sales report. Prices are no better than stable, showing little boost from thin supply on the market.

Existing home sales tally the number of previously constructed homes, condominiums and co-ops in which a sale closed during the month. Existing homes (also known as home resales) account for a larger share of the market than new homes and indicate housing market trends. (National Association of Realtors)

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 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.