New Home Sales and Future Stock Market Returns

Posted in Economic Indicators, Real Estate


Each month, the Census Bureau announces and the financial media report U.S. new home sales (seasonally adjusted and annualized) as a potential indicator of future U.S. stock market returns. Release date is about three weeks after the month being reported. Moreover, new releases may substantially revise recent past releases, so that the Census Bureau historical data set effectively has a longer lag. Does this economic indicator convey useful information about future stock market returns? To investigate, we relate future S&P 500 Index returns to new home sales at the monthly release frequency. Using monthly data for the S&P 500 Index and for seasonally adjusted annualized new homes sales over the period January 1963 through September 2014 (621 months), we find that: (more…)

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