Existing Home Sales is a monthly measure of the sales volume and prices of existing single-family homes, condominiums, and co-ops nationwide. To learn more, you can read the following article. Don't forget to follow GIC's Instagram to get daily market briefing information.

What is Existing Home Sales

Existing Home Sales measures sales and prices of existing single-family homes for the nation as a whole, and provides a breakdown for the West, Midwest, South, and Northeast regions of the country. These figures include condos and co-ops, in addition to single-family homes. Existing Home Sales is a monthly measure of the sales volume and prices of existing single-family homes, condos, and co-ops nationwide. But what exactly are Existing Home Sales? Existing homes, unlike New Homes, are homes that are owned and occupied before they are put on the market. Existing Home Sales account for more than 90% of total Home Sales, and the monthly data records completed transactions.

Difference between existing home sales and new home sales

The obvious response is that Existing Home Sales are a better indicator, since they account for 90 percent of the market. That is true. However, we must remember that all Existing Home Sales were once New Homes. New Home Sales, therefore, are a long-term indicator of the health of our economy. If New Homes are not being built, it could mean worse conditions down the road. The important thing is to take into account all the data we can. A New Home Sale is recorded by the Census Bureau after the sales contract is completed and a deposit is received. The Existing Home Sales report, on the other hand, is released by the National Association of Realtors, not the Census Bureau. Existing Home Sales are not new. This category includes single-family homes, condominiums, and co-ops. Existing Home Sales are considered “sold” after the closing process is complete, which typically takes between 30 and 60 days. Therefore, even though the New Home Sales and Legacy Home Sales reports are released around the same time each month, they are actually measuring different time periods. Therefore, in 2000, the National Association of Realtors created a new sales measure called pending-home sales, which includes data on homes that have been sold but have not yet closed. The Pending Home Sales report has a similar duration to New Home Sales.

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The Impact of Existing Home Sales in Forex

Both Existing Home Sales and New Home Sales in the United States have a significant impact on how the Forex market behaves. The housing and mortgage sectors were hit hard during the last recession and have yet to fully recover from the devastating impact. Furthermore, they are affected by government policies that are widely believed to have contributed to the decline in US economic growth in recent years. So how does this affect the foreign exchange market? Let’s consider the Existing Home Sales Report by the US Census Bureau, which tracks the annual number of Existing Homes sold during a given month. This data helps gauge the strength of the housing market in the United States. It also serves as an important indicator of the current strength of the country’s economy and in particular, the strength of the local currency, the USD.

Bearish and Bullish Behavior of USD Based on Property Sales Reports

The US Home Sales report can be implemented when making predictions about the behavior of the US dollar market. When the annual number of residential properties sold exceeds expectations, the USD currency may exhibit bullish behavior. Its price may rise due to higher levels of confidence in the housing market, which, in turn, leads to an increase in the number of potential investors. The opposite is true whenever a decrease in the annual number of residential properties sold is reported. If the result is below expectations, this can hurt the USD value and cause the currency to behave bearishly, i.e. a decrease in the price of the USD can be expected. Another important report released by the Census Bureau is the one that measures the annual number of new single-family residential properties sold or put up for sale. This report is released monthly and measures the number of New Homes sold in the previous month. It usually has a more pronounced effect when it is released before the Existing Home Sales report due to the strong correlation between the two. With that in mind, its reading affects the price of the USD currency similarly to the Existing Home Sales Report. Whenever the reading exceeds estimates and sales data, this immediately reflects on the USD and causes it to behave bullishly. Likewise, if the opposite happens and the number is below expectations, then this should be interpreted as bearish for the US dollar.

Currency Exchange Rates and Property Prices

It becomes clear that there is a real correlation between the USD exchange rate and current residential property prices. This is due to the fact that foreign exchange rate fluctuations are caused by a variety of economic factors, including consumer confidence, changes in a country’s gross domestic product, its monetary policy, and inflation. In turn, changes in foreign exchange rates have a significant impact on the real estate market. One interesting phenomenon to observe in this regard. Whenever the US dollar strengthens, it tends to sell at a higher price against weaker currencies. This will often lead to a spike in property prices. So, if a foreigner wants to buy a house in the United States, they will most likely have to spend more of their local currency to make a purchase in USD. Therefore, prospective foreign investors in the US real estate market are advised to keep a close eye on the Forex market. They should wait until their own currency has strengthened enough against the USD. This is the best time to make a home purchase in the United States because you will have to use less of your home currency to make a purchase in USD. The strength of a foreign investor’s home currency in relation to the dollar determines the price of the property they want to buy in the US.

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Impact of Slowing Property Market on Currency

Since it affects currencies, housing market data is used for fundamental analysis. A significant decline in Home Sales in the US could result in what is known as a balance sheet recession. The latter may have a marked negative effect on the local economy. This phenomenon is observed whenever there is significant debt in the private sector and people are forced to save money rather than spend or invest it. A snowball effect is imminent as this decrease in spending levels can lead to a slowdown in the country’s economic growth rate. It stands to reason that a balance sheet recession would also negatively affect the USD exchange rate in the Forex market. The USD would fall in value against foreign currencies. Here is an example of how this works. The United States is entering a household balance sheet recession, leading to a depreciation of the dollar against the EUR. If a hypothetical US investor wanted to buy EUR with USD, they would have to spend more of their home currency for the purchase. Similarly, if a US citizen wanted to invest in residential property in Europe while their own country is in a recession. They would need more USD to pay for the foreign property price in EUR. All this happens because the economy is not as prosperous during a recession and therefore less attractive to foreign exchange investors. In turn, this would lead to a decrease in demand for the country’s domestic currency in the Forex market. After learning about existing home sales is a monthly measure of the sales volume and prices of single-family homes, condominiums, and cooperatives nationwide, you can also learn other trivia through the GIC Journal. Well, if you are interested in trading, you can register at GIC to be able to trade by becoming a trader or market maker!