Existing Home Sales Rise Less than Expected
Existing Home Sales measures the change of existing residential buildings that were sold during the previous month. This report helps to gauge the strength of the U.S. housing market and is a strong indicator of overall economic strength.
The Survey states that 4.48 million existing residential buildings were sold in March, however, this is lower than the 4.61 million expected by analysts. This is essentially bearish for the U.S. housing market.
Existing-home sales were down in March but continue to outpace year-ago levels, while inventory tightened and home prices are showing further signs of stabilizing, according to the National Association of Realtors.
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, declined 2.6 percent to a seasonally adjusted annual rate of 4.48 million in March from an upwardly revised 4.60 million in February, but are 5.2 percent above the 4.26 million-unit pace in March 2011.
Lawrence Yun, NAR chief economist, said the recovery is in the process of settling into a higher level of home sales. “The recovery is happening though not at a breakout pace, but we have seen nine consecutive months of year-over-year sales increases,” he said. “Existing-home sales are moving up and down in a fairly narrow range that is well above the level of activity during the first half of last year. With job growth, low interest rates, bargain home prices and an improving economy, the pent-up demand is coming to market and we expect housing to be notably better this year.”
An increase in existing homes sold implies a healthy housing market, and because of the multiplier effect, housing has an impact on the rest of the economy. Increases in homes sold suggest increased household income and in turn an economic expansion, and visa versa.
The National Association of Realtors  is the national association representing the real estate finance industry which compiles this information.
Traders who believe that a beat in Existing Home Sales is a leading indicator for the economy, you might want to consider the following trades:
- Short building companies like PulteGroup (NYSE: PHM ) because less houses being sold decreases demand for homes and as a result means less demand for home builders.
- Short companies like Louisiana-Pacific (NYSE: LPX ), who manufacture and distribute products and materials for home construction.
Traders who do not believe that the Survey is a leading indicator for the general housing market, you may consider alternative positions:
- Long building companies like KB Home (NYSE: KBH ) because these companies may be oversold.
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