US: Existing Home Sales

Wed Sep 20 09:00:00 CDT 2017

Consensus Consensus Range Actual Previous
Existing Home Sales - Level - SAAR 5.480M 5.350M to 5.550M 5.350M 5.440M
Existing Home Sales - M/M Change -1.7% -1.3%
Existing Home Sales - Yr/Yr Change 0.2% 2.1%

Reflecting hurricane weakness in Houston, existing home sales came in at the low estimate in August, at a 5.350 million annualized rate for a 1.7 percent monthly decline. Sales in the South fell 5.7 percent in the month to a 2.150 million rate though sales in the West also fell, down 4.8 percent to 1.200 million. These were offset by a 2.4 percent gain in the Midwest to a 1.280 million rate and a 10.8 percent jump in the least active housing region which is the Northeast to a 720,000 rate.

The split between single-family homes and condos shows a 2.1 percent decline for the former to a 4.740 million rate and a 1.7 percent gain for the latter to 610,000. Year-on-year, single-family sales are barely in the plus column at 0.4 percent with condos negative at minus 1.6 percent. Total sales are up fractionally at 0.2 percent (note that year-on-year sales in Houston fell 25 percent in the month).

Prices have been doing better than sales, at a year-on-year gain of 5.6 percent. But August was a weak month for prices, down 1.8 percent on the median to $253,500 for the second straight decline. Lack of supply is a major factor in the housing market, down 6.5 percent year-on-year for resales at 1.880 million which on a monthly basis is down 2.1 percent. Supply relative to sales is at a tight 4.2 months for a fourth month in a row.

The National Association of Realtors, which compiles the report, notes that fast conditions remain in play with days on the market declining and that first-time buyers are still being held back by high prices. They expect hurricane effects to hold down the data for the next 4 to 5 months before a bounce back begins in 2018.

Housing was having a hard time building steam going into Hurricanes Harvey and Irma following which the sector doesn't look to be a significant contributor to the year-end economy. Watch next week on the calendar for the new home sales report.

Market Consensus Before Announcement
Existing home sales have been more disappointing than not, falling 1.3 percent in July to a 5.440 million annualized rate that, nevertheless, is still near expansion highs. Condo sales weakened in July as did sales of single-family homes. But forecasters do see some improvement for August with the consensus at 5.480 million despite Hurricane Harvey at month end. Note that sales of new homes, which have also been soft yet near expansion highs, won't be released until the following week.

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.