Real estate whiplash: new data says market is recovering (or not)
Monday's Existing Home Sales report, issued by the National Association of Realtors showed sales up exactly 10%. The trade group actually described this motion as the market having "jumped." These numbers reflect a 10% increase in the sales of completed homes from August to September. However, when you compare these September 2010 figures to existing home sales from September 2009, it's actually almost a 20% decline in home sales year-over-year.
Of course, in September of 2009, buyers were buying at a pretty frantic pace in order to qualify for the November 2009 homebuyer tax credit deadline (which was later extended). The organization's chief economist, Lawrence Yun, said the upshot is that the "housing recovery is taking place but will be choppy at times."
Then, Tuesday, Standard & Poor's published its Case-Shiller home price index, showing that sales prices for homes in America's 20 largest metro areas had actually declined by 0.3% in August, after the numbers were seasonally adjusted. Fifteen of America's largest 20 real estate markets had price declines from July to August 2010; 12 of the same 20 markets had annual price increases from August 2009 to August 2010.
The conclusion? S&P spokesman David Blitzer called the report "disappointing," and concluded that "the housing market continues to bounce along the recent lows."
But that's not all -- today, the National Association of Home Builders announced a 6.6% increase in new home sales. Builder and NAHB Chairman Bob Jones interpreted this stat to indicate that "new-home sales are finally moving in the right direction – albeit slowly."
So, which is it? Should these numbers disappoint, or not? Is the market recovering, or not? Are these people even looking at the same housing market?
The answer to all of these questions is: kind of.
First off, things that make the market recover also tend to make home prices and interest rates higher for buyers. So, in terms of whether we should be disappointed by any housing numbers, it's always the case that what is disappointing to homeowners and sellers will be pleasing to buyers.
Secondly, none of this week's data findings are large enough in either direction to really be a significant indicator of the housing market's recovery or further decline.
And finally, when you drill down and take a more detailed look at each report, they actually make sense in the context of each other. The NAR existing home sales data looked at the increase in the number of existing homes sold from July to August -- and found them to be up. The NAHB data showed a smaller increase in the number of new homes sold in the same time period as the NAR report -- August to September 2010. It seems fair to interpret these two data points, together, to suggest that buyers might finally be getting over their 'tax credit hangover' -- the massive drop-off in urgency that all housing indicators reflected for months after the April 30 expiration of the homebuyer tax credit.
The Case-Shiller report's decline in housing prices, then, seems the most confounding in the context of the other two reports, but isn't really, when you understand the underlying details. The Case-Shiller index showed a decline in housing prices, but from a different time period than the other two reports: July to August of this year. If you look back at the NAR existing home sales and the NAHB new home sales reports from June and July, you'd see big declines in home sales activity. Slow sales put price pressure on sellers so it's predictable that prices would decline from July to August. And, once prices decline, it's predictable that sales should pick up a bit -- which also jives with the home sales activity data that came out this week.
Don't let the data get you down (or make you dizzy). When you look to see exactly what is being measured (e.g., sales, sale prices, etc.) and what time frame is being discussed in the report, most often, seemingly contradictory data can be reconciled.