Today's Report (12/22/2021)

Existing-home sales rose in November, denoting three consecutive months of increases, according to the National Association of Realtors. Three of the four major U.S. regions reported growth in monthly sales, while the fourth region held steady in November. From a year-over-year perspective, only one region experienced a rise in sales as the three others saw home sales decline.

Total existing-home sales completed transactions that include single-family homes, townhomes, condominiums, and co-ops, grew 1.9% from October to a seasonally adjusted annual rate of 6.46 million in November. Sales fell 2.0% from a year ago (6.59 million in November 2020).

“Determined buyers were able to land housing before mortgage rates rise further in the coming months,” said Lawrence Yun, NAR’s chief economist. “Locking in a constant and firm mortgage payment motivated many consumers who grew weary of escalating rents over the last year. “Mortgage rates are projected to jump in 2022, however, I don’t expect the imminent increase to be overly dramatic.”

Yun forecasts the 30-year fixed mortgage rate to average at 3.7% by the year-end of 2022.

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.