US pending home sales rose by 1.5% month on month in March. This was above the forecast of 0.1%.
Pending home sales track contract signings for existing homes and can point to near-term market activity. The release shows a 1.4 percentage point beat versus expectations.
The unexpected 1.5% jump in March pending home sales shows the housing market is stronger than we anticipated. This resilience in a key economic sector suggests the Federal Reserve may have less reason to consider cutting interest rates soon. We must now adjust our view that the economy was definitively cooling.
This data directly challenges the market’s recent bets on rate cuts, and we saw a similar pattern in 2023 when strong data repeatedly pushed back the timeline for Fed easing. We should consider options strategies that profit from interest rates remaining elevated, such as puts on Treasury bond ETFs like TLT. The CME’s FedWatch tool has already seen the probability of a mid-year rate cut drop from 55% to below 40% following this morning’s release.
For a more direct play, this is a clear positive for homebuilders and related industries. We should look at buying call options on homebuilder ETFs, which often see sustained gains after such positive surprises. For example, after a similar upside surprise in the housing market last year in late 2025, the ITB homebuilders ETF rallied nearly 10% over the following month.
The stronger US economy, coupled with delayed rate cuts, also points toward a stronger US dollar. This makes call options on the dollar index (UUP) look attractive against currencies from central banks that are closer to cutting rates. Historically, periods of Fed hawkishness, such as the one seen from 2022 to 2024, coincided with significant dollar strength, a trend that could re-emerge now.
