Home sales numbers always go up this time of year, like clockwork. Compared to this time last year, home sales are down. – Ilene
The Stupid Exuberance Over New Homes Sales
Courtesy of John Carney at ClusterStock
OMG! You guys! The housing market is finally bottoming! Let’s party!
Every year around this time, we expect to get a phony rush from the housing market. It”s like clockwork. If it’s March, it’s time to get excited about home sales numbers. And it’s only going to get worse for the next five or six months. Then September will come around and everyone will realize that our enthusiasm was built on sand.
Why does this happen every year? Because home sales are highly seasonal.
"Anyone with kids tries to avoid disrupting their school year when possible," Barry Rithotlz explains. "And so, the ideal time to move into a new town (and school district) is prior to the start of the new school year in September. That factor, along with other annual holiday activity, explains the annual rhythm of the existing home sales."
He continues:
January is the worst month of the year for sales. From that low point, sales improve gradually for each of the next 6 months. They plateau over July and August, and then began heading down until December. This occurs year after year.
For those people who actually want to understand the state of the Housing market, you have two options that avoid the cyclical seasonality: 1) You use year over year data. This removes the seasonal patterns by comparing January to January, June to June, etc. And 2) Compare non seasonably adjusted monthly data over the course of multiple years.
So how did the new home sales do year over year? Horrible. Sales of new homes fell 41 percent from February 2008. In other words, new home sales aren’t up. They are down. A lot.There was one bright spot in today’s data: the supply of homes at the current sales rate fell to 12.2 months’ worth from 12.9 months.
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