The US Existing Home Sales is a report released by the National Association of Realtors (NAR) that provides information on the number of previously owned homes that were sold during a given month in the United States. The report tracks the number of completed transactions for single-family homes, townhomes, condominiums, and co-ops, and includes data on the median sales price and the length of time that homes remain on the market.
The report is considered a key indicator of the health of the US housing market and is closely watched by economists, analysts, and policymakers. It is released monthly, usually around the third week of the month, and is based on data from the previous month.
The report is calculated by the National Association of Realtors (NAR) using data from multiple listing services (MLS) throughout the country. MLS is a database used by real estate agents to list properties for sale and share information with other agents.
The NAR collects data on completed transactions of single-family homes, townhomes, condominiums, and co-ops from MLS databases and other sources. The data is then analyzed to determine the number of existing homes that were sold during the month, the median sales price, and the length of time that homes remained on the market.
The calculation of the median sales price is based on the price of the home that falls exactly in the middle of all homes sold during the month, with half of the homes sold above that price and half sold below it. The calculation of the length of time that homes remain on the market is based on the time between when a home is listed for sale and when it goes under contract.
It’s worth noting that the US Existing Home Sales report provides a snapshot of the housing market at a specific point in time and is subject to revisions as more data becomes available.
Relevance of the Index
The US Existing Home Sales report is a key indicator of the health of the US housing market, and it is closely watched by economists, analysts, policymakers, and investors. Here are some reasons why the report is relevant:
- Economic Growth: The housing market is an important contributor to the US economy, and existing home sales have a significant impact on economic growth. When more homes are sold, it boosts economic activity and can lead to increased consumer spending, job creation, and economic expansion.
- Consumer Confidence: Existing home sales can reflect consumer confidence in the economy. When people are optimistic about their job prospects and the overall state of the economy, they are more likely to buy homes. High levels of existing home sales can signal that consumers are feeling confident about the economy and their financial situation.
- Housing Market Health: Existing home sales can provide insight into the health of the housing market. A strong housing market with high levels of existing home sales can indicate that demand for homes is high, prices are rising, and supply is low. Conversely, a weak housing market with low levels of existing home sales can indicate that demand is low, prices are falling, and supply is high.
- Interest Rates: Existing home sales can be affected by changes in interest rates. When interest rates are low, it can make it more affordable for people to buy homes and can lead to higher levels of existing home sales. Conversely, when interest rates are high, it can make it more expensive to buy homes and can lead to lower levels of existing home sales.
Overall, the US Existing Home Sales report is an important economic indicator that provides insight into the health of the housing market and the broader economy. It can help policymakers, investors, and analysts make informed decisions about the state of the economy and future trends.
Effects of the indicator in the market
The indicator US Existing Home Sales refer to the housing market, but it is also interpreted as a measure of the progress of a country’s economy. When the demand for existing homes is high and is reflected in an increase in home sales, investors tend to consider that the economy is growing. This conclusion makes sense because consumers buy more houses when they have more confidence, which means that they feel secure about the labor market.
Here are some of the ways that the report can impact the market:
- Stock Market: The report can impact stock prices for companies that are related to the housing market, such as homebuilders, mortgage lenders, and real estate brokers. Positive news in the report can lead to higher stock prices for these companies, while negative news can lead to lower stock prices.
- Bond Market: The report can also impact the bond market, particularly the market for mortgage-backed securities (MBS). MBS are bonds that are backed by pools of mortgages, and the performance of the housing market can affect the value of these securities. Positive news in the report can lead to higher demand for MBS and can lead to higher prices, while negative news can lead to lower demand and lower prices.
- Interest Rates: The report can also impact interest rates, particularly for mortgage rates. Positive news in the report can lead to higher demand for mortgages, which can push up mortgage rates. Conversely, negative news in the report can lead to lower demand for mortgages and can push down mortgage rates.
- Consumer Confidence: The report can also impact consumer confidence in the economy and the housing market. Positive news in the report can lead to increased confidence, which can lead to higher levels of consumer spending and investment. Conversely, negative news in the report can lead to decreased confidence and lower levels of spending and investment.
The housing market is a sector that is also related to various sectors of the economy, so it can drag these sectors in one way or another. Thus, when existing home sales increase, is considered that there is an increase in the number of mortgages, therefore, it is expected that the financial industry is also growing. Other important sectors such as appliance sales, electronic products such as televisions, furnishing, and home products including furniture, etc.., are also impacted by changes in existing home sales. Also, everything related to renovation, repairs, etc.., would be affected by the data for this indicator.
In the case of the bond market, the investor can anticipate a negative scenario if the existing home sales indicator is increasing. Indeed, if the indicator shows that demand and consumption are rising is likely that the prices increase causing a rise in inflation. The result of economic growth and inflation will probably be an increase in interest rates in the short-medium term, and thus a reduction of bond prices in the market and increased profitability of new bonds issued.
In the event that this indicator provides a negative result which indicates that the existing home sales are declining, we could clearly anticipate a worsening of economic conditions and a change in the economic cycle. Most likely it would be then a reduction in interest rates to help the country’s economy to recover, from which it can be deduced that the value of the national currency would be devalued due to the recessionary economic environment. Under these conditions, in the Forex market, the U.S. dollar will suffer a decline against other major currencies like Euro, or GBP.
In the opposite scenario, the U.S. dollar will rise against other currencies because of the prospect of an improvement in its economy.
Can this indicator have an effect on the Forex market?
The US Existing Home Sales report can have an impact on the foreign exchange (Forex) market, particularly for currency pairs that involve the US dollar. Here are some of the ways that the report can impact the Forex market:
- US Dollar: The report can impact the value of the US dollar. Positive news in the report can lead to higher demand for the dollar, which can push up its value. Conversely, negative news in the report can lead to lower demand for the dollar and can push down its value.
- Other Currencies: The report can also impact the value of other currencies. Positive news in the report can lead to increased demand for currencies of countries that have close economic ties with the US, such as Canada and Mexico. Conversely, negative news in the report can lead to decreased demand for these currencies.
- Risk Sentiment: The report can also impact risk sentiment in the Forex market. Positive news in the report can lead to increased risk appetite among traders, which can lead to increased demand for higher-yielding currencies and decreased demand for safe-haven currencies, such as the US dollar and the Japanese yen. Conversely, negative news in the report can lead to decreased risk appetite and increased demand for safe-haven currencies.
Overall, the US Existing Home Sales report can impact the Forex market, particularly for currency pairs that involve the US dollar. It is closely watched by Forex traders and can provide important insights into the health of the US economy and the housing market.
You can get more information about important fundamental economic indicators for Forex in the following section: Forex fundamental analysis in Forex