US: Existing Home Sales

Fri Oct 20 09:00:00 CDT 2017

Consensus Consensus Range Actual Previous
Existing Home Sales - Level - SAAR 5.300M 5.100M to 5.400M 5.390M 5.350M
Existing Home Sales - M/M Change 0.7% -1.7%
Existing Home Sales - Yr/Yr Change -1.5% 0.2%

Existing home sales posted their first gain in four months, rising 0.7 percent in September to a 5.390 million annualized rate that is near Econoday's top forecast. Hurricane effects are hard to gauge with the National Association of Realtors reporting that sales in Florida were down substantially though sales in Houston have already recovered.

The sales gain came at a price discount as the median fell 3.2 percent to $245,100 for what is still, however, a respectable 4.2 percent year-on-year gain. Supply is still very tight, at 1.900 million resales on the market which makes for a useful 1.6 percent gain though the yearly rate is down 6.4 percent. On a sales basis, supply is unchanged at only 4.2 months.

Sales in the South fell 0.9 percent in September and follow August's 5.7 percent decline. These may be hurricane effects but they're not overly substantial given mixed readings in other regions. All regions are either slightly lower to flat year-on-year.

And overall sales are flat, down 1.5 percent compared to September last year. Yet this report is positive for what is a lukewarm housing sector. Watch for sales of new homes and pending sales of existing homes on next week's calendar.

Market Consensus Before Announcement
Weakness in the Harvey-hit region of the South pulled down existing home sales by 1.7 percent to a 5.350 million annualized rate though sales in the West were also weak. Price strength has been slowing though supply of available homes on the market has remained very tight. The National Association of Realtors warned in the last report that hurricane effects could slow resales through the remainder of the year. Forecasters see September's results, a month hit by Hurricane Irma's strike on Florida, coming in a bit lower at 5.300 million.

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.