Sunday, October 25, 2009


I was going to do a post on Existing Home Sales and how they were not up except in a bizarro world. Barry not only got off a rant but then backed it up with another post explaining why his rant was correct. I recommend both of them.

So I'll just put up Calculated Risk's chart of the action.

These are non-seasonally adjusted. CR likes to use the previous 5 years of data for each of the month so you can make a comparison. The thinking is something along the line of month-on-month growth may not tell the whole story because there are underlying reasons why September sales are always lower than August. [It's because people have to move before school year starts to have their children start on time.] Here we can see sales were up year-on-year, which is a positive. However the headline Big Rebound in Existing-Home Sales Shows First-Time Buyer Momentum belies the fact sales actually dropped from August. Also as TBP reports the tax credit is also extending the sales season as buyers are motivated to close before the November deadline. NAR though has skin in the game in distorting the data in a manner which looks the most beneficial to them like Edward Bernays script tells them to do.

Finally, one last idea on existing home sales (EHS) effect on the economy; it is not that big. It is most certainly not as big as a new home sale. A new home sale has raw materials being turned into a sale. EHS are secondary market activity, akin to equities, it just shifts money from one party to another. If the previous owner made renovations and upgraded the home than their is an addition to the capital stock of housing but secondary markets of themselves add little to the economy. [commissions, etc]

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