US: Existing Home Sales

Wed Jan 24 09:00:00 CST 2018

Consensus Consensus Range Actual Previous Revised
Existing Home Sales - Level - SAAR 5.750M 5.500M to 5.900M 5.570M 5.810M 5.780M
Existing Home Sales - M/M Change -3.6% 5.6% 5.1%
Existing Home Sales - Yr/Yr Change 1.1% 3.8% 3.2%

Lack of supply pulled down existing home sales in December and may very well pull down sales in January as well. Existing home sales fell 3.6 percent in December to an annualized rate of 5.570 million which is near the low end of Econoday's consensus. But November, despite a small downward revision to a 5.780 million rate, remains by far the best month of the expansion, with the 5.700 million rate in March last year the next strongest.

Supply in December's market fell a very steep 11.4 percent in the month to 1.480 million homes. On a sales basis, supply fell from 3.5 months in November to 3.2 months which is a record low in 19 years of available data. Lack of choice is an increasing problem for the resale market.

Prices softened slightly which won't be drawing new homes onto the market. The median slipped 0.2 percent in the month to $246,800 for a year-on-year increase of 5.8 percent.

This year-on-year price rate is well above the 1.1 percent gain in overall sales which points perhaps to future price concessions and even less supply. On the year, supply is down a very sizable 10.3 percent.

The split between single-family and condo sales shows weakness for the latter, with sales down 11.6 percent on the month to a 610,000 annualized rate. Single-family sales fell a monthly 2.6 percent to 4.960 million.

Housing data are usually volatile which should take the surprise out of December's weakness. Still, resales remain solid though the lack of supply is a serious obstacle for future sales.

Market Consensus Before Announcement
Existing home sales had been lagging sharp acceleration in new home sales until the November report when sales jumped 5.6 percent to a 5.810 million annualized rate. November's rate was by far the strongest of the expansion with 5.700 million in March last year the next closest. But the sales surge drove down supply to only 3.4 months which means a lack of selection was likely to have slowed December sales. Still, a very solid 5.750 million rate is Econoday's consensus for December.

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.