If you own a home-related stock like Home Depot or Williams Sonoma, you may see the stock react sharply around the 25th of each month. You might also see this happen if you own an appliance retailer like Best Buy or a mattress company like Tempur-Pedic. These moves tend to coincide with the release of a macroeconomic data point called existing home sales. What is this metric, and why is it so important for so many companies?

You can essentially think of existing home sales as the number of homes sold over that month. Home sales are important because you tend to buy a lot of stuff when you buy a home. If you've ever bought a house, think about all the things that you bought along with that. You may have bought new furniture, paint, a mattress, dishware, art, a microwave, a TV, or maybe some tools to fix up some wall damage. This all adds up to a lot money, and, on average, can range from $4,000 to $7,400 more spending than homeowners who don't move. This spending ends up being a big stimulus to home-related retailers that sell those products.

Let's take a look then at how this translates into financial results at a company like Home Depot. Below is a graph comparing Home Depot's comparable store sales (the best measure of their sales trends) to home turnover (which is existing home sales plus new home sales). The correlation is directionally strong:

You can see that Home Depot's sales will lag turnover at times, which makes sense -- when you move, you're likely to buy stuff in the following months, not immediately during the purchase of the home.

Due to its impact on revenue, existing home sales is often watched closely by companies and professional investors. However, I'm at a loss for why the number is not more closely watched by the media. 

So what do recent trends in existing home sales tell us? This was a major cause of concern for housing stocks recently, and it continues to be a point that investors debate over. You can see that housing turnover slowed recently from the high teens in mid-2013 to the negatives in mid-2014, which in turn led to HD comps slowing as well. Fortunately, it does appear that home turnover is flat-lining, which would suggest the worst of the headwind may be behind us.