NAR reported that Existing Home Sales rose 3.6 percent in June. In response to this, MSNBC notes:
“The turnaround in the housing market appears finally to be here and indeed may be gaining some speed,” wrote Joel Naroff, president of Naroff Economic Advisors Inc.
Stocks jumped on the news, with the Dow Jones industrial average rising above 9,000 for the first time since early January.
The NAR numbers suggest that sales have stopped falling, and this is doubtless a good thing. But the numbers really don’t support the idea that sales are rising–yet.
The reason is that the NAR Existing Home Sales number is a seasonally adjusted annualized number. This is a correct method for reporting (or at least I have reasons to think it is correct, as I am partly responsible for the development of the Existing Home Sales Methodology). But a seasonal adjustment is a statistical measure, and as such cannot be known with precision. June is a month that requires lots of adjustment, because June sales are always higher than sales in the average month. I am guessing that 3.6 percent is inside the 95 percent confidence interval of seasonally adjusted sales, so the best interpretation of the NAR release is that sales were flat or better in June.
The really good news in the report is the fact that the share of sales that are non-distressed sales is rising.
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Are we surprised? Or just so affixed to our computer screens, blackberries and cell phone that we forget real estate is Seasonal!
If home sales did not increase we would be floored, desperate and start to panic again. Analysts refer to the time in 2006 when 7.2 million housing units sold, but historically the number was around 5.5 million units. We should be relieved that the market is following historical selling patterns.
Sales should be up in July, August and September; but what are we going to do when activity falls off for the seasonal 4th and 1st Quarter period? The median sale price should be reversing itself and values should continue to stabilize. But again, this is all within historical patterns for real estate.
Are we that desperate for a news reporter or an economist working for the National Association of Realtors take on the market?
There are fundamental issues that remain in the market that still have not been addressed by the government or major financial institutions. There are alternatives that can restore stability to the markets that are not being addressed.
Do not be surprised in August to see Sales Activity grow 2.5% to 3%, August 2.0 to 2.5% and September barely over 1%. That is real estate and that is what we need to report.