- Existing-home sales increased 0.4 percent in January from one month prior while new home sales declined 9.2 percent. These headline figures are seasonally adjusted figures and are reported in the news. However, for everyday practitioners, simple raw counts of home sales are often more meaningful than the seasonally adjusted figures. The raw count determines income and helps better assess how busy the market has been.
- Specifically, 302,000 existing-homes were sold in January while new home sales totaled 37,000. These raw counts represent a 31 percent loss for existing-home sales from one month prior while new home sales dropped 3 percent. What was the trend in the recent years? Sales from December to January decreased by 27 percent on average in the prior three years for existing-homes and rose 11 percent for new homes. So this year, both existing and new home sales underperformed compared to their recent norm.
- Why are seasonally adjusted figures reported in the news? To assess the overall trending direction of the economy, nearly all economic data – from GDP and employment to consumer price inflation and industrial production – are seasonally adjusted to account for regular events we can anticipate have an effect on data around the same time each year. For example, if December raw retail sales rise by, say, 20 percent, we should not celebrate this higher figure if it is generally the case that December retail sales rise by 35 percent because of holiday gift buying activity. Similarly, we should not say that the labor market is crashing when the raw count on employment declines in September just as the summer vacation season ends. That is why economic figures are seasonally adjusted with special algorithms to account for the normal seasonal swings in figures and whether there were more business days (Monday to Friday) during the month. When seasonally adjusted data say an increase, then this is implying a truly strengthening condition.
- What to expect about home sales in the upcoming months in terms of raw counts? Independent of headline seasonally adjusted figures, expect busier activity in February and even better activity in March for existing-home sales. For example, in the past 3 years, February sales typically increased by 4 to 5 percent from January and with more gains in March where sales rose by 26 to 37 percent from February. For the new home sales market, the raw sales activity in February tends to be better than that occurring in January, and activity is expected to grow more in March. For example, in the past 3 years, February sales rose by 6 to 15 percent from January while March sales rose by 2 to 14 percent from February.
Copyright NATIONAL ASSOCIATION OF REALTORS®. Reprinted with permission.