Previous : -1.0%
Forecast : -0.5%
Definition : The pending home sales index was developed to cover the lag in the Existing Home Sales, as they are accounted when the sale contract is closed, and since most transactions usually involve mortgages, which takes up 30-60 days to close, the sales then cover sales contracts that were signed the prior month or two.
For that the National Association of Realtors created this monthly series to over come the lagging effect, as they are based on sales of existing homes where the contract has been signed yet the transaction has not been closed yet; making by that the two indices existing home sales, and pending homes sales, roughly equivalent, but not the new home sales.
Why is it useful?Basically the index provides a gauge into the economic conditions, as it was designed to cover the lag in the existing home sales, yet it did not manage to gain more significance from that index. That was for the reason skeptics consider that the importance is in the closed deal despite that it is lagging and not in the signed deal as perhaps buyer falter and is not approved for a mortgage loan, by that making the index volatile and subject to revision.
Nevertheless like any other indicator for the housing sector they provide very high correlation with interest rates, as they tend to expand the most in the recovery phase when the economy starts picking up and interest rates are low and starting to rise.
The Money generated to realtors from the sales and the circulation in the financial system is and important aspect of growth. While the ripple effect the consumer ignites when buying a property is what counts as they tend to spend more on durables and appliances which helps the growth cycle and in role economic expansion as a whole which will pour directly into the GDP.
Technically a stronger GDP means a stronger equities market, and in the case of this index we are talking specifically for the direct impact at realtors, construction, and mortgage lender (along with baking sector) stock are to be positively impacted with the rise in sales. While the currency will strengthen against its counterparts on the back of a strong economy and with that the perception of a future rate hike providing the currency with a higher yield making it more appealing in the eyes of investors.
Previous : -1.0%