• Existing-home sales increased 5.1 percent in March from one month prior while new home sales dropped 1.5 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, 420,000 existing-homes were sold in March while new home sales totaled 48,000.  These raw counts represent a 34 percent gain for existing-home sales from one month prior while new home sales increased 7 percent.  What was the trend in recent years?  Sales from February to March increased by 30 percent on average in the prior three years for existing-homes and rose 9 percent for new homes.  So this year, existing-homes outperformed compared to their recent norm while new home sales underperformed.
  • 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 busier activity in April and even better activity in May for existing-home sales. For example, in the past 3 years, April sales typically increased by 11 to 19 percent from March and with more gains in May when sales rose by 10 to 13 percent from April. For the new home sales market, the raw sales activity in April tends to be better than that occurring in March, while May’s activity seems to be more volatile. For example, in the past 3 years, April sales rose by 4 to 5 percent from March. However, sales in May decreased by 2 to 7 percent in 2015 and 2013 while they increased 10 percent in 2014.

existing sales raw count

new sales

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.