US: Pending Home Sales Index

Wed Mar 28 09:00:00 CDT 2018

Consensus Consensus Range Actual Previous Revised
Pending Home Sales Index - M/M 3.0% 0.5% to 6.0% 3.1% -4.7% -5.0%
Pending Home Sales Index - Level 107.5 104.6 104.3

Existing home sales have been struggling to move higher but today's pending home sales index will raise expectations for improvement. Pending home sales rose a sharp 3.1 percent in data for February though they follow an even sharper 5.0 percent revised decline in January. The Northeast has been showing life in recent housing data with February pending sales jumping 10.3 percent in the month. Pending sales in the South rose 3.0 percent with the Midwest up 0.7 percent and the West up 0.4 percent.

Market Consensus Before Announcement
Pending home sales are expected to rebound 3.0 percent in February after posting a very sharp 4.7 percent decline in January which did not, however, result in weakness for final sales of existing homes which instead posted a solid February gain. Note that the consensus range, from 0.5 percent to 6.0 percent, is very wide.

The National Association of Realtors developed the pending home sales index as a leading indicator of housing activity. Specifically, it is a leading indicator of existing home sales, not new home sales. A pending sale is one in which a contract was signed, but not yet closed. It usually takes four to six weeks to close a contracted sale.

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 the pending home sales index which measures 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.

The National Association of Realtors moved up its publication schedule in 2011. Prior to 2011, the reference month was two months trailing the release date. In 2011, the reference month trails only by one month to the release month.