Monday, March 24, 2008

Lying with statistics

One of our reader's sent in a link to this article on, "Home sales rise on biggest-ever price drop".

The National Association of Realtors reported that sales by homeowners rose 2.9% in February to a seasonally adjusted annual pace of 5.03 million, up from January's reading of 4.89 million. It was the first month-over-month rise of the annualized pace since July."

This comment makes it seem like sales have bottomed out and are starting to rebound. The NAR (and the mainstream media) loves to quote month over month increases and declines, when they should be focused on year-over-year changes.

Though February's pace beat economists' expectations, sales last month were still down 23.8% from a year earlier. Economists surveyed by expected the report to show existing home sales slowed to an annual pace of 4.86 million.

The median price of a home sold during the month fell 8.2% to $195,900 from $213,500 a year earlier - the largest year-over-year price drop on record. Before the start of the current housing slump, it had been 11 years since prices declined, when compared with the same period a year earlier.

"That's a huge drop in prices, which is how you move the merchandise," said Kasriel.

Sale prices have now fallen 15% from their peak in July 2006, and are down 14% from June 2007, when the most recent steady downturn began. That brings the median price of existing homes sold down to May 2004 levels."

There's the real story. Even though prices have dropped 8.7% from February last year (the largest drop ever recorded), sales are still down almost 24% from last February. That doesn't sound like the merchandise is moving to me.

If you look at the recent chart I posted on sales per month, you'll see that an increase in sales is totally normal for February. (this is Portland data, but I'm sure nationally you see the same trend) That's not news. The fact that sales didn't increase with an 8% decrease in prices? That's news. That means we're far from the end of the slump.

"The report is a sign that the price environment is weaker than the Realtors' most recent forecasts. Though NAR chief economist Lawrence Yun said in a release that a "notable gain" in existing home sales is not expected until the second half of 2008, the Realtors' March forecast called for only a 6.3% decline in housing prices in the first quarter, compared to a year ago. NAR also forecast a median price of $200,500 for the first quarter. Given the current environment, March sales would need a very strong showing, both in median prices and the pace of sales, to reach the Realtors' forecast."


1 comment:

Anonymous said...

Here's what the NY Times just posted in an article whose title would look optimistic:

"But the median price of a previously owned home declined in February to $195,900, an 8.2 percent drop from the period a year earlier. Still, home prices continued to plunge: in February, they had their worst year-over-year drop in four decades."