Preview: U.S. August Existing Home Sales Report

On Tuesday, the National Association of Realtors (NAR) will release the Existing Home Sales (EHS) report for August. According to the Bloomberg consensus, EHS should increase by 2.6% MoM to 6.01M SAAR.

My proxies confirm that EHS should be close to 6.0M in August, which would be the highest since December 2006. Local/state data and different reports also point to a jump of median home sales price amid a continued decline in inventory.

Buyers benefited from favorable market conditions

Fundamentals improved with a sharp decline of mortgage rates. According to Freddie Mac, the average for a 30-year fixed-rate loan remained below 2.90%, which is close to the lowest level on record. In this context, Freddie Chief Economist highlighted that “Despite the recession, low rates have spurred first-time homebuyer activity, up 19% in August from July.”
 

Another increase in Existing Home Sales would be coherent with the bounce in Pending Home Sales.

As the National Association of Realtors (NAR) noted, “The Pending Home Sales Index (PHS), a leading indicator of housing activity, measures housing contract activity, and is based on signed real estate contracts for existing single-family homes, condos, and co-ops. Because a home goes under contract a month or two before it is sold, the Pending Home Sales Index generally leads Existing-Home Sales by a month or two.” In this context, It would be coherent if EHS finally catch up with PHS as suggested by the chart below.

 

Local/state reports confirm that sales kept rising on a YoY basis in August

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