US: Existing Home Sales

Wed Mar 21 09:00:00 CDT 2018

Consensus Consensus Range Actual Previous
Existing Home Sales - Level - SAAR 5.420M 5.300M to 5.620M 5.540M 5.380M
Existing Home Sales - M/M Change 3.0% -3.2%
Existing Home Sales - Yr/Yr Change 1.1% -4.8%

A jump back higher for single-family homes leads a positive existing home sales report for February. Total sales rose 3.0 percent to a higher-than-expected 5.540 million annualized rate to lift the year-on-year rate out of the negative column to plus 1.1 percent.

Sales of single-family homes rose 4.2 percent in the month to a 4.960 million rate with this yearly reading at plus 1.8 percent. This offsets continued weakness for condo sales which fell a sharp 6.5 percent in the month for a year-on-year minus 4.9 percent.

But the message of today's report is definitely positive including a 4.6 percent rise in supply to 1.590 million. Yet on a sales basis supply, reflecting February's strong gain in sales, is unchanged at a very thin 3.4 months.

The gain in sales didn't come at the expense of prices where the median rose 0.4 percent to $241,000 for a 5.9 percent increase from this time last year. Regional sales data show monthly gains for the West and South, the two leading regions for resales, and declines for the Midwest and Northeast.

Home sales are struggling to move higher, held down by lack of choice for buyers and also high prices. Rising mortgage rates are another negative factor. New home sales will be posted on Friday with a gain expected.

Market Consensus Before Announcement
Existing home sales have been slowing and any rebound looks to be contained based on pending sales which are down sharply. Supply of resales on the market is very thin and a stubborn and increasing obstacle to sales growth. Econoday's consensus for February is a 5.420 million annualized rate which would be up from January's disappointing 5.380 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.