A recent post on my blog at www.BeachCityDigs.com told of how home sales were considerably up
in May. Â In this one, I'm relaying a report by the Wall Street Journal
that home sales were considerably down in May. Â Head spinning
Both posts are true, revealing the difficulty in understanding the
housing market by merely glancing at headlines.
The posts refer to different measures:
Sales of existingÂ ("used, gently or otherwise") homes
were indeed up 19.2%
Sales of new (previously unoccupied) homes (often mistakenly
interpreted as new sales of existing homes) were down by 32.7%.
Why would this be the case, and which if either should you
Well, new home sales are certainly good for the
economy, but they are a small percentage of the total inventory of
houses. Â But besides pure levels of buyer demand, new home sales are
greatly dependent upon the number of new homes that builders are
building! Â So if homebuilders are not building as many homes as before
(they aren't), or if special financing isn't being offered in this
market, then that measure will tend to decline. Â You should care about
this if you are a homebuilder, or invest in homebuilders, or are an
economist, or live next door to an enormous new tract offering big
discounts and 0% financing..Personally, I care much more about the
number of new housing permits issued than the number of new homes sold.
Existing home sales have to do with the natural
turnover of the nation's inventory of homes, whether built in 2009 or
1909, so long as they've been previously occupied. Â This is a much more
telling economic indicator with respect to the housing market. Â You
should care about it if you're a current or prospective homebuyer or
seller! Â But like any measure, I wouldn't worry too much about it on a
month to month basis. Â Because it may or may not be "seasonally
adjusted," and it may or may not be affected by factors as simple as a
different number of days in the month!