US: Pending Home Sales Index

January 30, 2017 09:00 CST

Consensus Consensus Range Actual Previous
Pending Home Sales Index - M/M 0.6% -1.8% to 1.5% 1.6% -2.5%
Pending Home Sales Index - Level 109.0 107.3

Existing home sales have been at cycle highs but have not been able to move above, yet new gains may perhaps be underway. The pending home sales index rose a very a strong 1.6 percent in December which is just above Econoday's top estimate. Pending sales track contract signings for resales and the gain points squarely at January and February strength for final sales which are tracked in the existing home sales report..

Regional data for pending sales show the West out in front with a year-on-year gain of 5.0 percent. The Midwest trails with a 3.4 percent year-on-year decline. This is a light week for housing data though the Case-Shiller price report will be a highlight of tomorrow's calendar.

Market Consensus Before Announcement
Housing indicators for the most part have been showing strength but not the pending home sales index which tracks initial contract signings for resales and was very soft in October and November. But forecasters see a bounce for December, predicting a consensus rise of 0.6 percent that in turn would point to a bounce higher for final sales of existing homes.

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.