Tomorrow morning, existing home sales for July will be released. Current estimate is 4.68MM, down from 5.37MM in June and 5.66MM in May. On the surface it seems conservative enough that it is 13% lower than the month before. But if the last two months' pending home sales are any indication, the actual existing home sales could be a lot worse than the current estimate. The majority of pending home sales become existing homes sales one or two months later and therefore can be used to predict actual home sales activity.
Let's take a look at pending home sales in the last few months. April's pending home sales index is 110.9. In May and June, the index dropped to 77.7 and 75.7. A drop of 30%!
Therefore, if existing home sales drop 30% from last month's 5.37MM, it will come in around 3.75MM, almost 1MM below the consensus of 4.68MM! Even if the 30% drop is measured from the 5.66MM in May, it still implies a dismal 3.96MM, way below the consensus.
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