This article was originally written by Doug Short. From 2016-2022, it was improved upon and updated by Jill Mislinski. Starting in January 2023, AP Charts pages will be maintained by Jennifer Nash at Advisor Perspectives/VettaFi.
Existing home sales measures the monthly sales of previously owned single-family homes. It makes up a huge part of the residential real estate market, as 88% of homes purchased last year were previously-owned homes according to the National Association of Realtors. More importantly, there exists a strong correlation between purchases of existing homes and consumer spending. An increase in existing home sales can indirectly stimulate economic activity with increased consumer spending on new furnishings and appliances. Alternatively, a sustained drop in existing home sales often foreshadows a downturn in the economy.
The Latest Data
This morning's release of the February existing home sales showed that sales surged to a seasonally adjusted annual rate of 4.58 million units from the previous month's 4.00 million, ending the 12-month streak of monthly declines. The latest number represents a 14.5% month-over-month increase, its largest since July 2020 and well above the Investing.com forecast of 5%. With that being said, existing home sales are down 22.6% compared to one year ago.
Here is an excerpt from today's report from the National Association of Realtors.
WASHINGTON (March 21, 2023) – Existing-home sales reversed a 12-month slide in February, registering the largest monthly percentage increase since July 2020, according to the National Association of REALTORS®. Month-over-month sales rose in all four major U.S. regions. All regions posted year-over-year declines.
Total existing-home sales,1 https://www.nar.realtor/existing-home-sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – vaulted 14.5% from January to a seasonally adjusted annual rate of 4.58 million in February. Year-over-year, sales fell 22.6% (down from 5.92 million in February 2022).
"Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines," said NAR Chief Economist Lawrence Yun. "Moreover, we're seeing stronger sales gains in areas where home prices are decreasing and the local economies are adding jobs." [Full Report]
Here is a snapshot of the data series, which comes from the National Association of Realtors. The data since January 1999 was previously available in the St. Louis Fed's FRED repository and is now only available for the last twelve months.
Over this time frame, we clearly see the real estate bubble, which peaked in 2005 and then fell dramatically. Sales were volatile for the first year or so following the great recession with monthly sales as low as 3.45 million units to as high as 5.44 million units. We have seen that same volatility following the most recent recession, with sales ranging between 4.00 million units to 6.73 million units.
The next release of existing home sales will be on April 20.
