Canada Retail Sales and US Existing Home Sales due out this morning

As we enter the US Thanksgiving Day week (on Thursday), the economic calendar will start with the Canadian Retail Sales report which will be released at 8:30 AM.  The expectation is for a gain of +0.6% with Ex Auto sales coming in at +0.4%. 

The Canadian Retail Sales have been improving in 2009 as the global economy improves.  Gas station sales have been the chief contributor over the last 3 months with a 21.8% annualized gain.  However, over the same time period strong gains in pharmacy sales (+13%), Building Supplies (+3.9%) and Furniture and electronics (+3.1%) have also led to gains in ex auto sales.  This segment of the report has shown increases in 3 of the last 4 months indicating the economy is showing some signs of bottoming across various sectors.

At 10:00 AM this morning, the US Existing Home Sales for the month of October will be released. The expectation is for the annualized sales pace to rise to 5.7 million units. This is up from the 5.57 million pace last month and would represent a 2.3% MoM gain.  Be careful in interpreting the MoM % gain as there is usually a revision to the prior month that can skew the figures.  So watch the annualized rate to gauge the strength or weakness of the report.  A sales pace of 5.7 million would be the highest since July 2007.  The 1st time homeowners rebate program is helping sales - especially in the low price range. 

Also released with the annualized sales pace is the months supply of homes on the market.  Last month, the supply of homes fell sharply to 7.8 months which is the lowest supply since March of 2007.  A movement lower would be good news for the housing market.  Watch this number. There is no estimate for this figure.

Existing Home Sales higher but supply increases too

Existing Home sales rises to 4.68 M. +2.9% up.

Supply of homes rises to 10.2 month supply of homes vs revised 9.6 months last month.  Still high despite higher sales pace.

Median Sales price $170,200 up from 169,900

Overall, I still don’t like the supply. Suggests that the supply added is greater than the increase in the sales pace.  For a healthier market, I would like to see increased sales to absorb some of the supply.  With the current scenario, the risk is home prices continue to remain under pressure.

This should be bearish for stocks and perhaps commodities. This could lead ironicallly to some dollar buying as a result.  EURUSD is lower post the report.  GBPUSD has dipped a bit as well.

Mortgage Applications fell by 14% in the current week

The good news is the purchase index rose by 1%.  The bad news was in the refinancing index which fell by 19% due to higher rates. The average rate on the 30 year fixed mortgage rose 4.81%, the highest level in 2 months.  Last week the rate was 4.69 and the rate reached a low of 4.61%. 

This index is the most timely mortgage/housing data available to the market and reflects data from approxiamately half of the US retail mortgage industry.  As such it can give a good gauge of the housing and refinancing demand.

Later at 10:00 AM the Existing Home Sales for April will be released.  The expectation is for the sales pace to increase to 4.66 M annualized pace from 4.57 M last month.  The months supply will also be of interest to the market. This measure shows the amount of supply in months of homes on the market given the current sales pace.  For example, if the annual sales pace increases while the total supply remains constant or declines, the months supply would decrease.  

If the sales pace does indeed rise this month to 4.66 M annualized pace, the month supply should fall all things being equal. The unknown is the supply of new homes that come on the market.  Foreclosed homes on the market have continued to increase adding to that supply.  This continues to dominate the housing market as those looking to buy are looking for the foreclosed homes which come at a discout.