U.S. existing home sales likely to have dropped in December

The U.S. existing home sales are expected to have dropped in December after rising for third consecutive month in November. The sales had risen to 5.61 million units in November, to the highest level seen since February 2007. But they might have registered a slight decline in December.

In November, the pending home sales index, which usually leads resales by one or two months, dropped 2.5 percent, implying that existing home sales are expected to have dropped in December.  There exists a tight connection between the year-on-year change in the unadjusted pending index and the year-on-year pace of existing home sales.

Even if the year-on- year pace for the pending index has averaged about 2 percent from August to October, resales averaged 7.2 percent year-on-year from September to November. According to a Societe Generale research report, the pace of resales is expected to have dropped to about 5.53 million units, but there might be certain downside risk to the forecast.