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US: Pending Home Sales Index
| Consensus | Consensus Range | Actual | Previous | |
| Month over Month | 0.0% | -0.5% to 0.5% | -7.3% | 0.3% |
| Index | 66.0 | 71.2 |
Highlights
A shockingly weak pending home sales report with a drop of 7.3 percent on the month in September from August. The pending home sales index at 66.0 is the lowest in history since the National Association of Realtors introduced the series in 2001. The August index is unrevised at 71.2.
The NAR blames the September drop on the recent spike in mortgage rates to levels above 7 percent. Note that mortgage rates have moved up again in October. The cheerleading NAR says mortgage rates may be topping out -- depending on what energy costs do -- and says buyers may be ready to pounce as soon as mortgage rates retreat.
With reporting suggesting President Trump is preparing a big attack on Iran after the Nov. 3 midterm election, it seems like energy costs, inflation, and mortgage rates are about to move still higher.
Market Consensus Before Announcement
Home sales seen flat with pending home sales limited by high mortgage rates.
Definition
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.
Description
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.
