Have Existing Home Sales Started to Rise?

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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About Richard K. Green 103 Articles

Affiliation: University of Southern California

Richard K. Green, Ph.D., is the Director of the USC Lusk Center for Real Estate. He holds the Lusk Chair in Real Estate and is Professor in the School of Policy, Planning, and Development and the Marshall School of Business at the University of Southern California.

Prior to joining the USC faculty, Dr. Green spent four years as the Oliver T. Carr, Jr., Chair of Real Estate Finance at The George Washington University School of Business. He was Director of the Center for Washington Area Studies and the Center for Real Estate and Urban Studies at that institution. Dr. Green also taught real estate finance and economics courses for 12 years at the University of Wisconsin-Madison, where he was Wangard Faculty Scholar and Chair of Real Estate and Urban Land Economics. He also has been principal economist and director of financial strategy and policy analysis at Freddie Mac.

His research addresses housing markets, housing policy, tax policy, transportation, mortgage finance and urban growth. He is a member of two academic journal editorial boards, and a reviewer for several others.

His work is published in a number of journals including the American Economic Review, Journal of Economic Perspectives, Journal of Real Estate Finance and Economics, Journal of Urban Economics, Land Economics, Regional Science and Urban Economics, Real Estate Economics, Housing Policy Debate, Journal of Housing Economics, and Urban Studies.

His book with Stephen Malpezzi, A Primer on U.S. Housing Markets and Housing Policy, is used at universities throughout the country. His work has been cited or he has been quoted in the New York Times, The Wall Street Journal, The Washington Post, the Christian Science Monitor, the Los Angeles Times, Newsweek and the Economist, as well as other outlets.

Dr. Green earned his Ph.D. and M.S. in economics from the University of Wisconsin-Madison. He earned his A.B. in economics from Harvard University.

Visit: Real Estate and Urban Economics Blog

1 Comment on Have Existing Home Sales Started to Rise?

  1. 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.

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