New Home Sales and the Forex Market

Forex market investments are tightly connected to the economic health of the economy. This part of the Forex market equation that assesses macroeconomic data is termed fundamental analysis, which plays a huge part in Forex market investment strategy.

In fact, most online Forex trading systems offer regular, updated economic data (i.e. online Forex journals) on the health of a country. One of the more important (and interesting) data or indicators is the housing market, particularly the new housing market or the number of new home sales.

Defining the new homes sales indicator
Like its name suggests, the new homes sales indicator represents the number of new homes sold in a period. The new homes sales report is published on a monthly basis, with a four-week lag time. These numbers receive a lot of publicity in the news, as they often make headline news.

Why is the new homes sales report so crucial?
Forex market investors and economists alike keep track of these numbers since it more or less shows where the economy is headed. In other words, it’s considered a leading economic indicator for things to come. If the number of new home sales increases over a specific period, then that means that increased spending will soon follow.

That’s because new homeowners will need to purchase more home furnishings for their property as well as take out additional loans for home improvement. With decreased new home sales figures, however, it can signal an economic downturn, as overall spending can further decrease (i.e. less mortgages, less home furnishing purchases).

New home sales in relation to housing starts and building permits
New home sales is merely a part of the overall housing market equation. Housing starts and building permits are even earlier indicators of an economy’s condition than new home sales. If investors are optimistic about the economy, then the number of building permits and housing starts will increase, as more investors will be willing to invest in the housing market.

In turn, a larger inventory of new homes will be available for the consumer. On the flip side, if investors are worried about the future direction of the economy, then they will be less likely to invest in new homes (less permit applications and fewer new housing starts). Fewer new home sales will follow with the decreased inventory.

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