US: Existing Home Sales

Thu May 24 09:00:00 CDT 2018

Consensus Consensus Range Actual Previous
Existing Home Sales - Level - SAAR 5.600M 5.480M to 5.640M 5.460M 5.600M
Existing Home Sales - M/M Change -2.5% 1.1%
Existing Home Sales - Yr/Yr Change -1.4% -1.2%

Yesterday's new home sales report showed less strength than expected while today's existing home sales results are outright disappointing. Sales fell 2.5 percent in April to an annualized rate of 5.460 million which falls below Econoday's low estimate.

The decline in sales came despite a sizable increase in supply on the market, at 1.800 million for a monthly gain of 9.8 percent though the year-on-year rate remains squarely in the negative column at minus 6.3 percent. On a sales basis, supply rose to 4.0 months from 3.5 months.

The median price for a resale rose 3.2 percent in the month to $257,900 which no doubt held down the month's sales. But the year-on-year rate for the median, in contrast to FHFA or Case-Shiller data which are near 7 percent, is a more moderate 5.3 percent.

All regions were weak in the month especially the Northeast where sales fell 4.4 percent. And only one region, the South, is in the year-on-year plus column and at only 2.2 percent.

Housing got off to a slow start this year and the first indications on the second quarter are not pointing to any acceleration. Housing, like consumer spending, has been unexpectedly flat.

Market Consensus Before Announcement
At a consensus annualized rate of 5.600 million, existing home sales in April are expected to hold onto the strong gains in March and February. Recent gains aside, resale trends have been flat with year-on-year readings still in the negative column.

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.

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.