Wednesday, June 8, 2011

Don't get too excited about the increase in housing sales

Posted By on Wed, Jun 8, 2011 at 8:59 AM

The Spokesman-Review’s latest real estate story “HouseSales Continue Climb” seems, at first glance, like a positive thing. Forfour-straight months, the number of home sales have increased.

But to assume that speaks to a recovery is a little like assuming that astory that “temperatures have increased for the last four months” says somethingsignificant about climate change. Just like in retail, in real estate, theseason matters.

Check out this graph posted last year at lilaccityrealestate.com:  

click to enlarge closedsales2010.jpg

The number of sales increases as it gets warmer and decrease as it getscolder. (Some weird stuff happened in 2010, but that was because of thefirst-time homebuyer housing credit.)

Basically every every single year, from the heights of the housing bubble tothe depths of the recession, the number of housing sales have increased fromJanuary to May, then decreases as it gets colder.

click to enlarge Trulio.png.jpg

That’s why, usually, those taking a look a the housing market compare a specificmonth with that same month the previous year. How many homes were sold inJanuary of 2011 compared to all the other Januaries? (This year was the slowestJanuary on record.)

But, as Bert Caldwell points outin the Spokesman, last year’s sales were likely artificially inflated by thefirst-time homebuyer housing credit, which expired after April 2010. So thatmetric of comparison is a bit iffy. We’ll have to wait until later months tounderstand if that matters.

But the news that housing sales have increased over the last few months is alittle like the news that the flowers are blooming and the birds have returnedfrom the south: It’d be a lot bigger news if it didn’t happen.


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