US: Existing Home Sales

Tue Nov 21 09:00:00 CST 2017

Consensus Consensus Range Actual Previous Revised
Existing Home Sales - Level - SAAR 5.440M 5.320M to 5.560M 5.480M 5.390M 5.370M
Existing Home Sales - M/M Change 2.0% 0.7% 0.4%
Existing Home Sales - Yr/Yr Change -0.9% -1.5% -1.8%

Existing home sales proved stronger-than-expected in October, up 2.0 percent to a 5.480 million annualized rate. Strength shows for both single-family resales, up 2.1 percent to a 4.870 million rate and up 1.7 percent for condos to a 610,000 rate.

Discounting was limited in October with the price median down only 0.2 percent to $247,000 for 5.5 percent year-on-year appreciation. Supply is yet again a negative for resales, falling 3.2 percent to 1.800 million homes on the market. On a sales basis, supply is at a very thin 3.9 months following five straight readings at 4.2 months.

Regional sales data show a sweep of gains led by the Northeast, up 4.2 percent which follows a surprise September burst in this region for sales of new homes. Hurricane effects have been limited in the housing sector but do include a 1.9 percent October rebound in the South following contraction in September and especially August. Sales in the West rose 2.4 percent in October with the Midwest up 0.8 percent. Yet the annual rate for total sales, at minus 0.9 percent, is a reminder that housing still has a ways to go.

The pending home sales index, which tracks initial resale signings, has been flat to negative which adds to the positive surprise of today's report. Housing data struggled through most of the year and the lack of supply will continue to hold back resales, but recent reports have been good and do point to a year-end contribution from the sector.

Market Consensus Before Announcement
Existing home sales have been modestly positive and rose 0.7 percent in September to a 5.390 million annualized rate. Hurricane effects have been hard to assess with Florida a negative for September but the Houston area turning around quickly and proving to be a positive. Forecasters see October's results showing another month of solid growth to 5.440 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.