Looking Askance at Existing Home Sales

Barron’s Alan Abelson discusses the lack of media skepticism when reporting most economic data these days. (Memo to media: A little skepticism, please.)

As an example, he channels Mark Hanson, who makes one of our favorite arguments about housing seasonality.


“Take the big play given to the 3.6% rise in sales of existing homes last month, which helped power a nearly 200-point rally in the Dow that lifted that venerable index over 9000 for the first time since January. Adding to the excited stock market response was the refrain in virtually every story, whether recounted in print or on the Internet and the tube, that this was the third month in a row of higher sales, signaling that the long-awaited but frustratingly elusive bottom in housing had been reached. Really?

As Mark Hanson of the eponymous real-estate advisory points out, it’s a seasonal phenomenon that until recent years has happened every year.

Indeed, the wonder of it is that, with prices soft and mortgage rates down, sentiment better and supply restrained by foreclosure moratoriums, sales weren’t higher than a year ago. Some of those benign factors are changing, and not for the better: Rates are creeping up, moratoriums are ending and foreclosures are on the rise.

Prices, moreover, are also rising, Mark points out, “but only at the low end, as investors and first-time home owners slug it out for $150,000 foreclosure sales.”

Prices at the middle and high end are a whole different and not very happy story. And Mark notes ominously, “rising foreclosures as the market enters the slow season is a negative housing leading indicator that wasn’t in place in July 2008, but was in place in July 2007,” when the roof started to fall in.

Although it may sometimes seem as if we do, it isn’t that we believe every hopeful bit of news should be dumped on. But an account tempered by a little perspective might give investors and everyone else a truer picture of the way things are rather than the way we wish they were.”

My analysis shows Existing Home Sales were flat for other reasons, but I will save those until Monday . . .


It Could Be Worse
Memo to media: A little skepticism, please.
Barron’s July 27, 2009

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