| Home is where the Money is |
 The effects of home sales and values are far reaching. Falling property values on defaulted loans were one of the primary causes of the global recession. Property values are directly tied to demand for housing. Lack of demand leads to increased inventory, and property values cannot appreciate until that inventory is liquidated. Home prices will continue to spiral downward until demand outpaces supply. Only then can property values increase (special circumstances notwithstanding). Numerous industries depend on healthy demand for housing and higher prices for success. Banks, construction companies, home improvement retail stores, copper miners, material producers, tool and heavy machinery manufacturers, tradespeople etc. thrive when demand for housing is robust. When housing demand and subsequent values are weak, a widespread impact is felt across numerous sectors of the economy. Therefore, Forex traders and investors pay close attention to the state of housing for signals of where to invest.Two housing data released give Forex traders direction in the US housing market: Existing Home Sales reported by the National Association of Realtors, and New Home Sales reported by the US Census Bureau. Both data releases come together to indicate overall US housing health. Robust existing home sales indicate the potential for a future increase in new housing demand. Strong demand for new housing benefits all industries associated with housing. Additionally, increasing home values give the homeowner equity in their property. This equity can be put back into the economy in the form of loans or lines of credit. The National Association of Realtors release their Existing Home Sales Report on approximately the 25th of each month [1]. A report is submitted with the data that focuses on economic conditions, polled consumer expectations and regional breakdowns of home value fluctuations. Robust existing sales is what “risk bulls” in the Forex look for as a leading indicator of a housing recovery. The US Census Bureau's release of New Home Sales is also a monthly report released on approximately the 25th of each month [2]. The report is a year to year (YoY) comparison of new home sales. The data is broken down by region and sale price. Trends up in quantity and price are positive signals for Forex “risk bulls”. Both housing data releases are known to cause volatile spikes in the Forex market. However, there is a probability of reversal to the initial market reaction once investors have had time to digest the reports and raw data behind the headline numbers. Housing is one piece of the larger fundamental puzzle, but an extremely important one at that. Sources: National Association of Realtors, http://www.realtor.org/research/research/ehsdata [1] US Census Bureau, http://www.census.gov/const/newressales.pdf [2] |
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