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Be Prepared For Some Confusion Tomorrow!

9/23 – As expected, the Existing Home Sales Report shows a 7.6% increase in month-over-month sales and a 19% decrease in sales year-over-year. No real news here.

 

ORIGINAL POST

The National Association of Realtors (NAR) will release the Existing Home Sales Report tomorrow. Be prepared for the confusion when the news media starts announcing the findings. Like every industry report, there are nuances that can be confusing to the lay person. We want to make sure you understand these nuances so you can appreciate what the report is truly saying.

The Existing Sales Report which includes single-family, townhomes, condominiums and co-ops, is based on transaction closings. There will be two different numbers reported:

  • The month-over-month (M-O-M) comparison and
  • The year-over-year (Y-O-Y) comparison

Neither of these numbers will accurately show what is taking place in the real estate market. Let’s explain why:

The Month-Over-Month Comparison

The M-O-M compares sales this month to last month. This number will probably show a healthy increase. Monday, the Washington Post, in an article titled Expected Rise in Home Sales May Show a Stabilizing Market, called for a substantial increase:

Home sales probably increased in August, a sign the U.S. real estate market is stabilizing after the expiration of a tax credit might have caused demand to plunge, economists said before reports on the housing market this week.

Sales of previously owned homes rose to a 4.1 million annual rate in August from a 3.83 million pace, according to the median estimate of economists ahead of the National Association of Realtors’ report on Thursday in Washington.

The actual number probably will show an increase. An increase over what is the question.  Last month, the report showed sales dropped 27.2% which was lowest level since the total existing-home sales series launched in 1999. This vacuum of sales was created by many buyers moving up their purchases to before the April 30, 2010 expiration of the Homebuyers’ Tax Credit. We better hope sales increase over that number. An increase will not necessarily mean the market is now stable though some media outlets will report just that.

Year-Over-Year Comparison

The Y-O-Y compares sales this month to the same month last year. This number may look very ugly. Market Watch, last week, ran a story Housing Data Not Expected to Sparkle. They reported that sales will be significantly lower than they have been.

Economists don’t expect many bright spots in the economic data in the coming week that will highlight the gloom of a newly-crippled housing market … Existing-home sales are expected to rebound to 4 million units. But this is only a portion of the record 27.2% plunge in sales in July to 3.83 million units. Sales are down from a peak of 5.79 million units in April.

Obviously, sales for the next few months will not compare favorably to the same months last year. At this time last year, sales were being driven by the expiration of the original Homebuyers’ Tax Credit (November 30). It would be unrealistic to think that this year’s sales wouldn’t pale in comparison.

Bottom Line

There may be very positive news generated by the month-over-month numbers. There may be very negative news generated by the year-over-year numbers.  Don’t get overly excited nor concerned. The truth will lie somewhere in the middle. Go on with your day realizing nothing much has changed.


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