Previous : 647 Thousands
Forecast : 645 Thousands
An economic indicator that measures sales of newly built homes. Released by the U.S. Department of Commerce's Census Bureau, it includes both quantity and price statistics. It is considered to be a lagging indicator of demand in the market and to affect mortgage.
Why is it useful?
New Home sales in an economic indicator which records sales of newly constructed residences in the United States. Because New Home sales trigger consumption, they have significant market impact upon release. New Home Sales also serve as a good indicator of economic turning points due to its consumer income sensitivity. Generally, when economic conditions slow down, New Home sales serve as the first indicator of such a depression.
New home sales are leading indicators for the economic activity. First of all, this shows that there is confidence in the economy as it is expanding and that is why people are purchasing new or existing homes. In addition to that, when it comes to new homes, employment in the construction sector will also increase. There will be more spending in the economy by new labor so demand for products will increase causing an overall boost in the currency value.
But what will affect the reading are interest rates. If the interest rates are high, then cost of borrowing money will also be high decreasing the amount of people that actually have the ability to borrow. This will cause the reading to go down.
Furthermore, another reading that could be tied to home sales is the purchase of durable goods. Durable goods are goods that last longer than a year. When purchasing a new house, the consumer will also have to purchase several durable goods for that new house. This will lead to more production of these goods therefore needing more labor. So as we can see, we can say that there is a directly proportional relationship between home sales and the purchasing of durable goods.
Now back to the increase in production. This increase will also have an affect on the stock market. As the production increases, companies stock will also increase. But due to interest rates hiking, it will have a negative affect on the stocks and cause them to decline again.
As for the impact of home sales on the currency's exchange rates a healthy robust housing market will definitely be translated into a stronger currency; that is merely a reflection to a production wheel that is on the run, strong consumers' sentiment, and finally robust economic growth, all factors combined will push forward economic growth rate strengthening employment in return and reigniting production levels and higher capacity utilization. In the longer run other that the positive effect of strong growth on the currency as well inflationary pressures that might arise in the economy and further monetary tightening policies makes the currency tempting for investors to buy, and by that appreciation for that currency against majors.
Previous : 647 Thousands