On Monday, we can expect to see the release of existing home sales data from the United States. This is a key signal for those that watch the United States economy or investors interested in US assets. So, today, we’ll briefly discuss what the data is, talk a bit about what we can expect to see and why, and finally, we’ll discuss why investors and economists alike care so much about the data.
What Is The Existing Home Sales Report?
The existing home sales report is released monthly. The data provided gives investors and economists an opportunity to look into the growth or lack there of in sales of homes that already exist. Essentially, the report tallies the number of previously constructed co-ops, condos, and houses that were sold throughout the month prior. Because there are far more existing homes than new homes, the existing home market gives economists and investors a way to spot and react to housing trends (We’ll get to that later).
What Can We Expect To See From The Data?
Before I get into speculation with regard to what to expect, please remember that my predictions are just for fun. Before making an investment decision, you should do you own research or talk to a certified financial planner.
With all of that said, I think we’re going to see strong new home sales. There are a few reasons for that prediction…
Non-Farm Payrolls – New non-farm payroll data shows that American’s aren’t struggling to get jobs as much as they were before. As a matter of fact, the data in the last non-farm payroll report absolutely blew away expectations;adding 257,000 new jobs in January compared to the expected 234,000. As more and more American consumers start to find meaningful employment, I can only imagine that tons of them will want to consider purchasing a home.
Consumer Spending – Another bit of data that became available recently is trends in United States consumer spending. Unfortunately, these trends weren’t so positive. While consumers are finding meaningful employment, and many part time workers are converting to full time, it seems as though consumers just aren’t spending enough money. So, we know that consumers are earning money and we know that they’re not spending much more than they used to. So, much of this most of the new money is being saved or spent elsewhere.
US Economic Outlook – It seems as though recently every report we’ve received about the US Economy has been overwhelmingly positive. From low jobless claims to positive corporate gains and more, all we seem to be seeing is good news. The bottom line is that consumers don’t buy houses in a down economy; they buy houses when the economic outlook seems favorable.
All in all, because of the reasons outlined above, I have to say that I expect to see positive growth in existing home sales.
Why Investors And Economists Care
As mentioned above, existing homes take the lion’s share of the market. With that said, the existing homes data we’ll be reading gives us an idea of much more than the housing market; it gives us a look into how stable consumers think our economy is. The bottom line is that few people are going to buy homes if they are not 100% sure in their mind that they will be able to pay for it over the long run. Those types of decisions just aren’t made during poor economic times. So, if the report is positive, it tells us that the economy is continuing to gain moment. However, if the report is negative, it tells us that consumers are still worried about economic conditions in the United States.
What Do You Think?
Do you think we’ll see a positive or negative existing home sales report? Let me know in the comments below.