Existing-home sales rose 3.2 percent in September from one month prior while new home sales increased 3.1 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 than the seasonally adjusted figures. The raw count determines income and helps better assess how busy the market has been.
Specifically, 484,000 existing-homes were sold in September while new home sales totaled 46,000. These raw counts represent a 10 percent decrease for existing-home sales from one month prior while new home sales dropped 2 percent. What was the trend in recent years? Sales from August to September decreased by 11 percent on average in the prior three years for existing-homes and decreased by 4 percent for new homes. So this year, both existing and new home sales outperformed relative 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 that 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 say 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, the raw sales activity in October is hard to predict while expect less activity in November. For example, in the past 3 years, October sales dropped 6 percent last year, increased 2 percent in 2014 and dropped 1 percent in 2013. In contrast, November sales dropped by 15 to 21 percent from October. For the new home sales market, expect busier activity in October while activity will diminish in November. For example, in the past 3 years, October sales increased by 3 to 16 percent from September while November sales dropped by 8 to 18 percent from October.