US home resales to climb to a two-year high

Housing activity in the US appears to be heating up. Pending home sales, which capture contract signings on home resales, rose in April to the highest level since 2007. 

Allowing for some lags and contract cancellations, existing home sales - which capture sale closings - increased by 4.2% to 5.25mln in May. This would mark the strongest pace of resale activity since 2013. An array of other housing indicators also points to an acceleration in housing demand. 

The NAHB sentiment increased sharply in June as homebuilders reported the strongest pace of current sales since 2005. Mortgage applications for purchases are also on the rise and the month-to-date average for June is at highest levels since 2013, or before the taper-tantrum derailed housing demand. 

Societe Generale notes:

• We expect new home sales data later this week to show a 6.8% increase which would put activity in this sector at highest levels since 2009. 
  
  
• Construction activity appears to be lagging demand, but we expect it to catch up over the coming months and contribute positively to GDP growth and employment. 
  
  
• Our 2.4% GDP forecast for the year assumes a 0.4% contribution from housing, the largest since 2012