The National Association of Realtors reported a new record for existing-home sales today. Sales of existing homes rose 4.5% in April to a seasonally adjusted annual rate of 7.18 million. What does this mean? -- and how does this relate to personal finance?

The existing-home sales indicator reports the number of previously constructed homes in which a sale closed during the month. Existing homes account for a larger share of the market than new homes and are a good indicator of housing market and overall economic trends.

Many economic indicators are reported in a seasonally adjusted annual rate (SAAR). A SAAR of 7.18 million homes means that 7.18 million resales will be recorded in 2005 if the current rate holds. This does not mean that 7.18 million homes were sold in April. It may help to look at the raw data to understand the concept of SAAR.

How do existing-home sales effect Personal Finance? Here are a few ideas:

• The economic "ripple" effect occurs. When more houses are being sold, there is more opportunity for furniture, appliances, and household goods to be sold. Watch stocks of retailers and home improvement companies during times of high existing-home sales.


• Demand for housing means that houses in my neighborhood should be selling faster, and for higher prices. Might it be a good time to sell my house?


• If demand for homes is up, so is demand for loans. Watch mortgage rates in comparison to existing-home sales data. Keep in mind that this is a lagging indicator -- it measures closings, not signed contracts. There were more closings in April, however these contracts may have been signed, and mortgage rates locked in, since February or March.


• If more folks are buying houses, there must be a comfortable and confident feeling and economic outlook.


• Could the increase in Interest-Only Mortgages be fueling this new record?
  

Thanks for reading!

mortgage calculator