Existing-home sales increased 5.1 percent in May from one month prior while new home sales increased 2 percent. These headline figures are seasonally adjusted figures and are reported in the news. However, for everyday practitioners, simple raw counts of home sales are often more meaningful compared to the seasonally adjusted figures. The raw count determines income and helps better assess how busy the market has been.
Specifically, 497,000 existing-homes were sold in May while new home sales totaled 51,000. These raw counts represent an 11 percent gain for existing-home sales from one month prior while new home sales remained the same. What was the trend in the recent years? Sales from April to May rose by 12 percent on average in the prior three years for existing-homes and by 2 percent on average for new homes. So this year, both existing and new home sales underperformed compared to their recent norm.
Why are seasonally adjusted figures reported in the news? To assess the overall trending direction of the economy, nearly all economic data – from GDP and employment to consumer price inflation and industrial production – are seasonally adjusted to account for regular events we can anticipate have an effect on data around the same time each year. For example, if December raw retail sales rise by, say, 20 percent, we should not celebrate this higher figure if it is generally the case that December retail sales rise by 35 percent because of holiday gift buying activity. Similarly, we should not say that the labor market is crashing when the raw count on employment declines in September just as the summer vacation season ends. That is why economic figures are seasonally adjusted with special algorithms to account for the normal seasonal swings in figures and whether there were more business days (Monday to Friday) during the month. When seasonally adjusted data shows an increase, then this is implying a truly strengthening condition.
What to expect about home sales in the upcoming months in terms of raw counts? Independent of headline seasonally adjusted figures, expect busier activity in June for existing-home sales. For example, in the past 3 years, June sales typically rose by 3 to 7 percent from May. For the new home sales market, the raw sales activity in June tends to typically drop by 3 to 11 percent compared to those occurring in May. However, in 2013 new home sales increased 8 percent in June from May. All in all it’s no time to be thinking of vacation at these months of the year for REALTORS®.