Today's Report (10/21/2021)
Existing-home sales rebounded in September after seeing sales wane the previous month, according to the National Association of Realtors. Each of the four major U.S. regions witnessed increases on a month-over-month basis.
Total existing-home sales completed transactions that include single-family homes, townhomes, condominiums, and co-ops, rose 7.0% from August to a seasonally adjusted annual rate of 6.29 million in September. However, sales decreased 2.3% from a year ago (6.44 million in September 2020).
"Some improvement in supply during prior months helped nudge up sales in September," said Lawrence Yun, NAR's chief economist. "Housing demand remains strong as buyers likely want to secure a home before mortgage rates increase even further next year."
Total housing inventory at the end of September amounted to 1.27 million units, down 0.8% from August and down 13.0% from one year ago (1.46 million). Unsold inventory sits at a 2.4-month supply at the present sales pace, down 7.7% from August and down from 2.7 months in September 2020.
The median existing-home price3 for all housing types in September was $352,800, up 13.3% from September 2020 ($311,500), as prices rose in each region. This marks 115 straight months of year-over-year increases.
"As mortgage forbearance programs end, and as homebuilders ramp up production – despite the supply-chain material issues – we are likely to see more homes on the market as soon as 2022," said Yun.
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 fire 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.