US: Existing Home Sales

Wed Dec 20 09:00:00 CST 2017

Consensus Consensus Range Actual Previous Revised
Existing Home Sales - Level - SAAR 5.550M 5.430M to 5.770M 5.810M 5.480M 5.550M
Existing Home Sales - M/M Change 5.6% 2.0% 2.4%
Existing Home Sales - Yr/Yr Change 3.8% -0.9% -0.5%

Housing data are now all in place, showing strong acceleration going into year end. Existing home sales jumped 5.6 percent in November to a 5.810 million annualized rate that easily beats Econoday's high estimate. November's rate is by far the strongest of this expansion with 5.700 million in March last year the next closest.

But the high volume of sales has pulled down available supply sharply which will limit sales in the next report for December. Supply on the market fell 7.2 percent in the month to 1.670 million. On a sales basis, supply was at only 3.4 months in November vs 3.9 months in October. Price data point to a healthy seller's market, up 0.8 percent on the month to a median $248,000 for a 5.8 percent year-on-year gain.

Regional sales data show 8 percent plus surges in the Midwest and South and nearly as strong of a gain in the Northeast where activity, which had been soft, has been picking up noticeably. Sales in the West slipped in the month.

This report follows two months of similarly strong results on the new home side of the market and, because of the acceleration, raises the question whether expected tax changes for next year are at play. But the National Association of Realtors, citing client comments, says the tax bill did not influence November's buying decisions and it further noted that the "great majority" of homeowners will qualify for mortgage interest and property tax deductions. Still, it will be interesting to see whether tax changes begin to affect home sales next year.

Market Consensus Before Announcement
New home sales have been climbing sharply while existing home sales showed strength of their own in October, up 2.0 percent to a 5.480 million annualized rate. Gains were posted for single-family resales, up 2.1 percent to a 4.870 million rate, and condos, up 1.7 percent to a 610,000 rate. The pending home sales index, which tracks initial signings for resales, jumped strongly in the last report and have forecasters looking for significant strength in this report for November, at a consensus rate of 5.550 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.