Watch for these key indicators ahead of the July 4th weekend (Part 5 of 8)
The real estate sector
The real estate sector is one of the most popular sectors among the U.S. investing community. It’s been especially popular after the housing bubble of 2008–2009, which took the U.S. economy into the Great Recession. The U.S. economy is so far still on track to recover from its 2009 lows.
The week ahead promises the release of three key economic indicators from the real estate sector.
Pending home sales index
The pending home sales index is released monthly by the National Association of Realtors as a leading indicator of housing activity. Specifically, it’s a leading indicator of existing home sales—not new home sales. A pending sale is one where a contract was signed but not yet closed. It usually takes four to six weeks to close a contracted sale.
The index rose 0.4% in April, building slightly on March’s 3.4% surge. To learn more details about this, read Pending home sales rose but still let down builders like Ryland . The reading for May is scheduled to release on Monday, June 30, with consensus estimates at 1.0% for May.
MBA purchase applications
The Mortgage Bankers’ Association releases its MBA purchase applications index weekly. The purchase applications index measures applications at mortgage lenders. This is a leading indicator for single-family home sales and housing construction. The index stood at -1% for the week ended June 25 compared to -5% in the previous week.
The construction spending indicator is released monthly by the Census Bureau, U.S. Department of Commerce. Construction spending is the dollar value of new construction activity on residential, non-residential, and public projects.
Construction spending in April gained 0.2% after a 0.6% boost in March. The data for May is due for release on Tuesday, July 1. Consensus estimates are positive at 0.5%.
These indicators gauge not only demand for housing, but also economic momentum. Businesses only put money into constructing new factories or offices when they’re confident that demand is strong enough to justify expansion. The same goes for individuals investing in a home. Plus, each time construction begins on a new home, it translates to more construction jobs. This leads to more income that will pump back into the economy. Once a home sells, it generates revenues for the homebuilder and the realtor and means many consumption opportunities for the buyer.
Popular real estate ETFs include the Vanguard REIT ETF (VNQ), with holdings in Simon Property Group Inc. (SPG) and Public Storage (PSA), the iShares Dow Jones US Real Estate Index Fund (IYR), and the SPDR Dow Jones REIT ETF (RWR). These ETFs reflect the performance of the housing and mortgage market in their returns.
Read on to learn about consumer spending indicators this week.
Browse this series on Market Realist:
- Part 1 - Watch for these key indicators ahead of the July 4th weekend
- Part 2 - Stay tuned for this must-know manufacturing report this week
- Part 3 - Why improving new orders boost manufacturing stocks and ETFs