Statistical Indicators

Interpreting NAR's Existing-Home Sales Data Series

Posted on Monday, October 18, 2010

by Jed Smith, Managing Director, Quantitative Research
NAR’s Existing Home Sales (EHS) numbers estimate the size of the residential market—providing the annual rate of sales each month. The data are based on the level of sales in a specific month, seasonally adjusted to an annual rate.
In July the number dipped to a 3. 8 million rate—down from a 5.8 million rate in April, and causing concern over the outlook for future home sales. The August sales number was 4.1 million—an improvement, but still significantly down from the 5 million plus figures reported over the past year.
The monthly sales number represents the actual state of the market in a given month. However, the reported sales rate may be misleading in terms of longer run trends and the underlying overall state of the market. There is frequently “a story” behind the numbers, and a bit of analysis is necessary to develop a complete understanding of the numbers.
The monthly sales numbers are important: the numbers summarize the month. However, the level of sales and the trend in sales over the previous 12 months provide additional information on market strength. Looking at a 12-month period (sales over the previous 12 months) shows that existing-home sales sales have been relatively stable over the past year – hovering around the the 5 million unit range, with a slight overall upward trend—even while the monthly numbers have fluctuated.
The one-month annualized figures appear to show a market in significant distress. Much of this fluctuation is due to the expiration of the recent government homebuying incentives. In contrast, the last-12-months sales figures show a reasonably stable market subject to monthly perturbations.
A look at actual monthly sales, not seasonally adjusted, further substantiates that sales are a little over 400,000 existing homes per month trending slightly upwards. They have been at that rate, more or less, for approximately two years.
Existing-home sales data need to be reviewed in terms of the sales in the current month, the 12-month-roll, and data trends for a full understanding of the market. The data reported as of August 2010 appear to indicate that the overall housing market has been relatively constant in terms of sales over the past 2 years—subject to fluctuation from month to month, but down significantly from a few years ago. Fluctuations in recent market trends can be seen as an adjustment to the end of the government’s tax programs. Future trends will be heavily influenced by employment, consumer confidence, and economic trends.
The latest statistics on existing home sales is available at our web site at Click here or on “Housing Statistics” in the left-hand navigation.

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