Existing Home SalesBy scorpion
Published: October 29, 2009
Data: U.S Census Bureau
Release time: 23rd to 29th of the month in survey
Source: National Association of Realtors
This is a report that details the sale of already constructed homes that have been in the market and are simply changing ownerships as people change dwellings either because of preference, having moved to new areas or any other reasons.
How is it important?
The information is compiled from monthly reports of existing single-family home sales from boards of Realtors and multiple listing systems. Existing-home sales are seasonally adjusted at an annual rate to represent the volume of homes sold. Median sales prices are not seasonally adjusted. A change in the median price is very important because it reflects changes in the mix of housing sold as well as the appreciation and depreciation of individual home prices. The appreciation and depreciation rates can give an insight into the economic situation during the period in survey. In spite of being a lagging indicator, it is therefore closely watched as it can clearly give direction of the economy considering that the existing home sales form about 85% of all home sales. Another reason as to why this indicator is a must watch for any investor is the fact that housing activity directly influences consumer spending which accounts for about two-thirds of the entire economic activity.
The National Association of Realtors compiles data on Existing-Home Sales and on the Median Sales Price of Existing Single-Family Homes. It includes statistics on the sale of already existing homes, which are being resold. It also measures average price changes in repeat sales or refinancing on the same properties. Only mortgage transactions on single-family properties are included.
How does it affect the forex trade?
The fluctuation in pricing of the same housing units over a period is a clear indication of the direction of the economy. If the same housing unit cost more than its price one year back, it gives an impression that housing costs are going up. This trend means either that there is too much money in circulation or the demand for homes has gone up. If the former is the case, then the Federal Reserve Bank has to take measures to check the dollar value. Checking the dollar value may lead to an increase in interest rates in order to slow down borrowing a factor that will indirectly influence the dollarís exchange rate.
How does it affect the stock market?
Having a direct impact on the consumer spending which accounts for about two-thirds of the overall economic activity, existing home sales has an impact on the stock market especially judging by the fact that it forms approximately 85% of home sales. This is a sizeable fraction of the economy. Investors always move their holdings depending on the perceptions they get from the economic indicators, if the housing sales are showing an increased demand in homes, smart investors may choose t exploit the opportunity by investing in the sector just like they would naturally try to shift their holdings to other sectors if the housing sector showed an eminent decline.- 2174 Views
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