• Existing-home sales dropped 3.2 percent in July from one month prior while new home sales rose 12.4 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, 514,000 existing-homes were sold in July while new home sales totaled 57,000.  These raw counts represent a 12 percent decline for existing-home sales from one month prior while new home sales rose 8 percent.  What was the trend in recent years?  Sales from June to July decreased by 1 percent on average in the prior three years for existing-homes and decreased by 11 percent for new homes.  So this year, existing-homes underperformed to its recent norm while new homes sales outperformed.
  • 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 that 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 less activity in August and even slower activity in September for existing-home sales. For example, in the past 3 years, August sales were unchanged or decreased by 3 to 9 percent from July while in September sales decreased by 7 to 18 percent from August. For the new home sales market, the raw sales activity for both months is very volatile. For example, in the past 3 years, August sales dropped by 5 to 6 percent in 2013 and 2015 while it increased 3 percent in 2014. Similarly, September sales were unchanged in 2013 while they increased by 3 percent in 2014 and decreased by 15 percent in 2015. 

raw ehsnew raw

Source: Economy

Copyright NATIONAL ASSOCIATION OF REALTORS®. Reprinted with permission.

This Article Appears Courtesy of Steven Diadoo

Steven Diadoo, Licensed Realtor in MN with BRIDGE REALTY and best-selling author of 'Road to Success' with Jack Canfield (Chicken Soup for the Soul), Board Member at Bowling for Brains Non-Profit 501(c)3 (Event to benefit the American Brain Tumor Association), licensed Realtor with Bridge Realty, Seen on DIY TV, Create Channel and PBS. For help buying and/or selling a house, please call (952) 270-6141 or Click here.