US: Existing Home Sales

January 24, 2017 09:00 CST

Consensus Consensus Range Actual Previous Revised
Existing Home Sales - Level - SAAR 5.550M 5.450M to 5.590M 5.490M 5.610M 5.650M
Existing Home Sales - M/M Change -1.1% -2.9% to -0.4% -2.8% 0.7% 1.4%
Existing Home Sales - Yr/Yr Change 0.7% 15.4%

Lack of homes on the market is increasingly the salient feature of the housing sector, one that is holding down sales. Existing home sales fell 2.8 percent in December to a lower-than-expected 5.490 million annualized rate. An offset is a sizable upward revision to November which now stands at 5.650 million.

Supply is the lowest it's been since at least 1999 according to the National Association of Realtors which compiles the existing home sales report. The number of houses on the market fell 11 percent in the month to 1.650 million. At the current sales rate, supply fell from 3.9 months to only 3.6 months. These readings are very low.

Yet the lack of supply isn't making for new price increases as the median, at $232,000, is down 0.9 percent on the month for a year-on-year rate of only plus 4.0 percent. This is down from 6.5 percent in November and is now back to multi-year lows.

Regional data show little variation, all little changed on the year with the Northeast in front, at plus 2.7 percent year-on-year, and the West at the rear at minus 1.6 percent which includes a 4.8 percent dip in December.

Sales of both single-family homes and condos fell in the month, down 1.8 percent to 4.880 million for homes and down 10.3 percent to 0.610 million for condos. The housing market has been stubbornly mixed with weakness in resales offset by strength in new homes. Watch for December's new home sales report on Thursday.

Market Consensus Before Announcement
Existing home sales have been on a steady but no more than moderate climb and may now be getting held down by higher mortgage rates. Forecasters see December's sales falling 1.1 percent to a 5.550 million annualized rate and down from cycle highs in November and October. Going into December, single-family resales were nearing a 5 million rate with condos at 660,000. But pending sales of existing homes, advance data that track initial contract signings, fell a sizable 2.5 percent in the last report.

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.