How to Track the Housing Market by Existing Home Sales and New Home Sales Reports

Since the housing market is very sensitive to the interest rate changes. The Federal Open Market Committee (FOMC) deterred the economic stimulus tapering in mid-September 2013. However, the tapering is still widely expected to occur in the near future. Therefore the housing market indicators are closely watched by investors. Existing home sales and new home sales are the two most important economic indicators in housing sector.

The economic reports for existing home sales and new homes sales are reported once a month. Both reports can provide insights for the healthiness and trend for the housing market. However, due to the different nature and timing of these two different reports, they still provide different information.

The existing home sales report is released monthly and before the new home sales report is announced.  The majority of existing home sales are reported when the sales contract is completed.  It usually takes 30-60 days for home buyers to process a mortgage loan. Therefore, the actual existing home closing sales figure involves a time lag with one to two months.

The existing home sales report includes number of home sales, the median selling prices, and inventory levels. The existing home sales report subject to seasonal adjustments since the housing market is largely affected by weather and seasons. The median selling prices figure includes the year-over-year and month-over-month changes.  

On the other hand, the new home sales are reported when the sales contract is signed or the deposit is accepted. On average, only about 30% of the new homes are sold at the time of building completion. The rest of new homes are transacted as the house buildings are either not started or still under construction.  

Compared with the existing home sales report, the new home sales report can reflect the housing situation in timely manner.  The new home sales report usually leads the existing home sales by a month or two.  However, existing home sales approximately account for 85% of total home sales, the market pays more attention to its report and detailed information.

Several ETFs are designed to track the real estate value. They are IYR, URE, DRN, etc. If you want to bet on the appreciation of housing prices, trading those ETFs in real estate sectors might be a good leverage! Be advised, they might not reflect the tax deduction benefit as you invest in the properties.

Both existing home sales and new home sales reports are announced at 10 AM EST.

You can track these two reports by the following link: http://biz.yahoo.com/c/e.html.

By the way, when you read these reports, you had better compare the actual data with the estimate from Briefing Forecast which is treated as whisper number.

Thanks for your reading and visiting. If you are interested in reading more economic indicators, you can visit:

http://top5indicators.blogspot.com/2013/09/how-to-read-economic-reports.html