Today's Report (11/22/2021)

Existing-home sales increased in October, marking two straight months of growth, according to the National Association of Realtors. Two of the four major U.S. regions saw month-over-month sales climb, one region reported a drop and the fourth area held steady in October. On a year-over-year basis, each region witnessed sales decrease.

Total existing-home sales completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 0.8% from September to a seasonally adjusted annual rate of 6.34 million in October. Sales fell 5.8% from a year ago (6.73 million in October 2020).

"Home sales remain resilient, despite low inventory and increasing affordability challenges," said Lawrence Yun, NAR's chief economist. "Inflationary pressures, such as fast-rising rents and increasing consumer prices, may have some prospective buyers seeking the protection of a fixed, consistent mortgage payment."

Move-in ready: US existing home sales hit 14-year high in 2020 | Coronavirus pandemic News | Al Jazeera

What Is It?

Measures monthly sales of previously owned single-family homes. 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.

What Are The Fundamental Effects?

The actual effect on the economy is relatively small because no new ground is broken, however, sales of existing homes can indirectly stimulate economic activity. An increase in sales shows that buyers are confident about their jobs and future income growth. A sustained drop or rebound in existing home sales often portends a turning point in the economy. If strength in housing fires up inflation, the Fed will eventually intervene with higher rates.

Why Do Investors Care?

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.

How Does It Affect The Markets?

CURRENCY - It is one of the dominant indicators of consumer spending and can potentially influence interest rates. The USD will remain firm, as long as the report doesn’t stumble into an extended downswing.

STOCKS - A strong report supports stock values, whereas a weak report might undermine them.

BONDS - An unexpected jump in existing home sales could easily scare bond investors away, which could lower bond prices, and raise yields. A sudden plunge in sales might foreshadow a slowdown in economic activity, which would support higher bond prices and lower rates.