Pardon our belated look at Existing Home Sales (but we’ve been busy).

For this post, we will look at our favorite chart — Existing Home Sales (NSA) — and also teach you how to read a National Association of Realtors news release.

Our favorite chart, courtesy of Calculated Risk, is below. It shows the Existing Home Sales BEFORE they get seasonably adjusted. The pattern you see is the home sales pattern — bottoming in December January, and peaking in June/July/August. Note the ongoing weakness — until the tax credit kicked in. Now, in 2011, we see more signs of weakness.

As to the National Association of Realtors, there is a small secret to reading their news eelease: You need to ignore every other paragraph. It typically looks like this:

Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data

Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit

Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data

Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit

The secret is to focus on the data, and ignore the spin.

For example:

Sales of existing-home sales rose in March, continuing an uneven recovery that began after sales bottomed last July, according to the National Association of Realtors.

Lawrence Yun, NAR chief economist, expects the improving sales pattern to continue. “Existing-home sales have risen in six of the past eight months, so we’re clearly on a recovery path,” he said. “With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain – primarily because some buyers are finding it too difficult to obtain a mortgage. For those fortunate enough to qualify for financing, monthly mortgage payments as a percent of income have been at record lows.”

Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 3.7 percent to a seasonally adjusted annual rate of 5.10 million in March from an upwardly revised 4.92 million in February, but are 6.3 percent below the 5.44 million pace in March 2010. Sales were at elevated levels from March through June of 2010 in response to the home buyer tax credit.

NAR’s housing affordability index shows the typical monthly mortgage principal and interest payment for the purchase of a median-priced existing home is only 13 percent of gross household income, the lowest since records began in 1970.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.84 percent in March, down from 4.95 percent in February; the rate was 4.97 percent in March 2010. Data from Freddie Mac and Fannie Mae show requirements to obtain conventional mortgages have been tightened, with the average credit score rising to about 760 in the current market from nearly 720 in 2007; for FHA loans the average credit score is around 700, up from just over 630 in 2007.

“Although home sales are coming back without a federal stimulus, sales would be notably stronger if mortgage lending would return to the normal, safe standards that were in place a decade ago – before the loose lending practices that created the unprecedented boom and bust cycle,” Yun explained.

OK, I cheated — I moved a paragraph to make this funnier. But the idea is that you look at the data and ignore whatever it is they are spinning about it.

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Existing Home Sales (NSA)

Chart courtesy of Calculated Risk

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Source:
Existing-Home Sales Rise in March
NAR, April 20, 2011
http://www.realtor.org/press_room/news_releases/2011/04/rise_march

Category: Real Estate, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

16 Responses to “How to Read National Association of Realtors News Release”

  1. JimInMissoula says:

    If the earth were about to be hit by a comet you’d still hear the realtors saying, “It’s a GREAT time to buy a home.”

  2. MGD says:

    OMG, that is frickin hysterical.

  3. Lugnut says:

    One wonders if Mr Yun is at all cogniscent of the universal scorn his professional opinion is held in. To call him a ‘chief economist’ is akin to calling the town drunk an ‘alcohol quality control analyst’.

  4. ewmayer says:

    Barry, you are very close, but here is the algorithm you really want to use:

    - Ignore every paragraph which includes the acronym “NAR”, the name of NAR’s current shill (currently “Yun”), or a blurb from a sell-side “analyst”.

    The reason you use the acronym “NAR” but not the full name is that the opening paragraph contains data, and invariably uses the full name.

    Try it!

  5. newton says:

    JiminMissoula – hilarious – totally concur..and good to see another Missoulian reading the good stuff. Just sold our house in the ‘snake on our own. Dealing with realtors was a complete farce.

  6. Jojo says:

    OK, I cheated — I moved a paragraph to make this funnier. But the idea is that you look at the data and ignore whatever it is they are spinning about it.
    ————-
    You could use a similar ROT for government unemployment and inflation data!

  7. Ted Kavadas says:

    Interesting post…there is always a bullish and bearish case that can be made at any given time…

    I’ve recently gone through some archived news items since 2005, and was surprised to see how many “housing bottom calls” there were.

    I don’t believe any type of firm “bottom” in housing is near at hand, unfortunately. This aftermath of the “bubble years” still has potential to cause serious price declines, even from these levels.

    For those interested, here is a post I wrote on the matter with some long-term charts to illustrate the issue:

    http://economicgreenfield.blogspot.com/2010/10/whats-ahead-for-housing-market-look-at.html

  8. U.S. Existing Homes Sales Rise on Distressed-Property Demand

    April 20 (Bloomberg) — Sales of U.S. previously owned homes rose in March as a mounting supply of properties in or near foreclosure lured investors.

    Purchases increased 3.7 percent to a 5.1 million annual rate, exceeding the 5 million median forecast of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed today in Washington. All-cash deals accounted for 35 percent of transactions, the most on record, the group said.

    Unemployment, falling property values and stricter loan rules may push the number of households losing their homes to a record level this year, a sign the market will take time to recover. Even with last month’s gains, housing may remain a weak component in the economic recovery that began in June 2009.

  9. super_trooper says:

    @JimInMissoula,
    “If the earth were about to be hit by a comet you’d still hear the realtors saying, “It’s a GREAT time to buy a home.””
    Sure it is, it may be the one and only time you’ll be able to buy a house.

  10. super_trooper says:

    @BR,
    “Now, in 2011, we see more signs of weakness.”
    Why?
    The levels are above those in 2009. Looks like upwards trajectory. 20110 was abnormal due to the tax credit.

  11. rktbrkr says:

    I can’t find the article but wasn’t it NAR that admitted they had been reporting inflated home sales for years?

  12. scottinnj says:

    I think you should take a page out of Irvine Renter’s Irvine Housing Blog and refer to this group as the NAr – dont capitalize the “R” they aren’t professional enough to deserve for their profession to be capitalized.

  13. bulfinch says:

    rktbrkr

    It was a Corelogic report, and yes, they’d been gigging the numbers for ten years, revising them upward.

  14. philipat says:

    I wonder if Yun is able to sleep at night? Economics is already the “Dismal science” but his next job will probably be on K Street. Beyond dismal.

  15. Joe Friday says:

    “Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 3.7 percent to a seasonally adjusted annual rate of 5.10 million in March from an upwardly revised 4.92 million in February, but are 6.3 percent below the 5.44 million pace in March 2010.”

    On their own website, the National Association of Realtors states that you need to compare a given month to the same month one year earlier, not month-to-month.

    I know, that doesn’t prevent the little weasels from even misrepresenting their data.

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