Jack Dunn - Reclaiming Common Sense

. One of the most anticipated pieces of economic data is the monthly existing home sales data. Other crucial reports are the new home sales, new home construction, and jobs report data. The September Jobs Report was weak.  The New Home Construction data was also weak. We have had an incomplete housing recovery. Units sold are a driver of the economy.


There are a number of ways to examine the data. The number of units sold can be compared to last month or last year. The same with the average sales price. The problem is that if last month was weak and this month is strong the difference is larger than it may appear if we compare the data to last September or prior Septembers. Comparing same month data eliminates the need for seasonally adjusting the data. When seasonal data from one month to another where both data points are adjusted is dubious, at best, and misleading at worst


Sales Prices have Recovered to Pre-Recession levels - Units have not. This is mixed news. People who have been holding back on moving because they owe more than their homes are worth may have more flexibility right now.  September sales are down 150,000 units from September of 2006 . Housing units spur retail sales and jobs.


Rolling Year sales are slower than 2003, 2008. If we compare the past twelve months of sales to prior years at the same time of year we can see that the rate of improvement is slowing. There was rapid improvement 2012 through 2014. The rate of improvement was not as good as it was during 2004 through 2006. This means two things: This recovery will take longer to achieve than it took for us to achieve the first time, and we could be faltering.


Year to date sales are trending between what we saw during 2000 and 2015. We have seen  3.968 million units sold during the first nine months of the year. The good news is that while we are doing poorer than we were during 2003, at the same time we are doing better than 2008. Using the same annual sales year to date we should see between 5.17 million and 5.26 million units.


All of the data from August was revised downward. Existing units sold were revised down from 541,000 to 539,000. The Average Sales Price was revised from $282,100 to 282,000. The inventory level was revised down from 2.04 million homes to 2.01 million homes, a decline of 30,000 homes. This is the fourth consecutive month where all of the data has been revised downward from the advance values.


Interest Rate Paradox. We are experiencing middling sales at historically low interest  rates for mortgages. Experience indicates that if we increase the interest rate charged that home buyers will either drop out of the market or dive in head first. Those who were on the cusp no longer qualify. Those who do qualify want to lock in interest rates. Sales prices could suffer because the amount of mortgage for which buyers would qualify would be lower. The paradox is that a bump in the interest rate could motivate uncertain buyers, increasing units sold, and decreasing sales prices which could reduce sales. We have sold more homes at higher interest rates. The uncertainty should not hold us back from increasing interest rates. If we are heading into a recession raising interest rates could exacerbate the situation.


We do not appear to be growing quickly. We do not seem to be failing. We may be stalling. It is important to remember that this is a broad overview of the country. All real estate is local.