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

What is Existing Home Sales

Existing Home Sales measures the sales and prices of existing single-family homes for the country as a whole, and provides breakdowns for the West, Midwest, South, and Northeast regions of the country. These figures include condominiums and cooperatives, in addition to single-family homes. Existing Home Sales is a monthly measure of the sales volume and prices of existing single-family homes, condominiums, and cooperatives nationwide. But what exactly is Existing Home Sales? An existing home, unlike a New Home, is a house that is owned and occupied before it is marketed. Existing Home Sales account for more than 90% of total Home Sales, and 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, as they control 90 percent of the market. That's true. However, we must remember that all Existing Home Sales used to be New Home. New Home Sales, therefore, is a long-term indicator of the health of our economy. If the New Home is not built, it could mean a worse situation later on. The important thing is to take into account all the data we can. A New Home Sales is recorded by the Census Bureau after completing the sales contract and receiving the deposit. The Existing Home Sales report, on the other hand, is released by the National Association of Realtors, not the Census Bureau. Existing Home Sales is not new. This category includes single-family homes, condominiums, and cooperatives. Existing Home Sales are considered "sold" after the completion of the closing process, which typically takes between 30 and 60 days. Therefore, even though the New Home Sales and Old Home Sales reports are released around the same time each month, they actually measure different time periods. Therefore, in 2000, the National Association of Realtors created a new sales measurement called pending-home sales, which contains data on homes that have been sold but have not been completely closed. The Pending Home Sales report has a similar duration to New Home Sales. 

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The Influence of Existing Home Sale in Forex

Both Existing Home Sales and New Home Sales in the United States have a considerable influence on how the Forex market behaves. The housing and mortgage sectors have been hit hard during the last recession and have not fully recovered from the devastating impact. In addition, it is influenced by the policies of state interests that are widely believed to have contributed to the decline in US economic growth in recent years. So how could this affect the foreign exchange market? Let's consider the U.S. Census Bureau's Existing Home Sales Report, which tracks the annual number of Existing Home Sales 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 country's current economic strength and in particular, the strength of the local currency, the USD.

USD Bearish and Bullish Behavior 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. The price may rise due to a higher level of confidence in the housing market, which, in turn, leads to an increase in the number of potential investors. The opposite is true whenever an annual decline in the number of residential properties sold is reported. If the result is below expectations, this can hurt the value of the USD and cause the currency to behave bearishly, i.e. a decline in the price of the USD can be expected. Another important report issued by the Census Bureau is a report that measures the annual number of new single-family residential properties sold or prepared 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 because of the strong correlation between the two. With that in mind, its reading affects the price of the USD currency similar to the Existing Home Sales Report. Whenever the reading exceeds the forecast and the sales data, this immediately reflects to the USD and causes it to behave bullishly. And vice versa, if the opposite happens and the figure is below expectations, then this should be interpreted as bearish for the US dollar.

Existing Home Sales

Currency Exchange Rates and Property Prices

It became clear there was a real correlation between the USD exchange rate and the current price of residential properties. This is due to the fact that fluctuations in foreign exchange rates are caused by various 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 considerable impact on the real estate market. One of the interesting phenomena to observe in this regard. Whenever the US dollar strengthens, it tends to sell at a higher price against a weaker currency. This will often lead to a surge 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 an eye on the Forex market. They will have to wait until their own currency strengthens 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 purchases in USD. The strength of foreign investors' domestic currency in relation to the dollar determines the price of the property they want to buy in the US.

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The Slowing Effect of the Property Market on Currencies

Because it affects currencies, housing market data is used for fundamental analysis. A significant decline in Home Sales in the U.S. can result in what is known as a balance sheet recession. The latter may have a noticeable 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. The snowball effect is imminent as this drop in spending levels could lead to a slowdown in the country's economic growth rate. It stands to reason that a balance sheet recession will also have a negative impact on the USD exchange rate in the Forex market. The value of the USD will fall against the price of foreign currencies. Here's an example of how it works. The United States entered a household balance recession, leading to the depreciation of the dollar against the EUR. If a hypothetical US investor wants to buy EUR with USD, they will have to spend more of their country's currency on the purchase. Likewise, if a US citizen wants to invest in residential property in Europe when his own country is experiencing a recession. They will need more USD to pay the price of foreign property in EUR. All of this happens because the economy is not so prosperous during a recession and therefore less attractive to foreign exchange investors. In turn, this will lead to a decrease in demand for the country's domestic currency in the Forex market. After knowing about existing home sales is a monthly measure of the sales volume and prices of single-family houses, condominiums, and cooperatives that exist nationwide, you can also learn other trivia through the GIC Journal. So, if you are interested in trading, you can register at GIC to be able to trade by becoming a trader or market maker!