US existing home sales are expected to bounce back to ‘normal’

Today's (December) US existing home sales are likely to bounce back to 'normal' after a 10% (MoM, sa) collapse in November wasn't corroborated by any of the other housing data. The trend in (new and existing) home sales has been downward over the course of 2015 but not greatly so and compared to one year ago (late-2014) it is still on an upward trajectory. Most importantly (for today's numbers), pending sales remained firm in December and, given the near-direct link between them and existing home sales, odds are consensus' expectations for a 9% rebound / surge prove correct.

Housing starts and building permits remain strong. Though growth has run sideways most of the year, December levels (reported earlier this week) remain 9%-12% above those of one year ago. On balance, housing should be a plus for overall GDP growth this year. Of the 2.1 percentage points of growth is expected in 2016, about .25 of them, 11% of total growth, should come from housing.

"We hasten to add, though, that along with business capex, housing is one of the main two risks this year. When rates went up in mid-2013 (what most refer to as the 'taper tantrums'), housing activity froze for 18 months", notes DBS Group Research.

Four additional Fed hikes are expected this year and for 10Y UST yields to end the year a good 50-70 basis points higher than today's 2.03%. The relatively minor increase should kill neither housing nor capex but they won't help either.