Monday, August 27, 2007

A matter of perspective

Today's NY Times has the following headline: "Existing Home Sales Fell in July". The article discusses data released by the National Association of Realtors [NAR] that reported the following data points:

Home sales slid 0.2 percent in July to a seasonally adjusted 5.75 million unit annual rate, according to the National Association of Realtors.

That brought the supply of unsold homes at the current sales pace to 9.6 months' worth, the highest level on record since 1999, when the association began tracking all types of properties, such as condominiums, together with single-family homes.

The supply of single-family homes, the bulk of the inventory included in the association's data, rose to 9.2 months' worth, which was the biggest supply on hand for sale since October 1991.

...median home prices fell 0.6 percent from a year ago to $228,900.

None of this sounds good. Indeed, "key business economists ... concluded that the risk of massive defaults on subprime mortgages and heavy debts is a bigger threat to U.S. economic prosperity than terrorism."

So I went to the data source to see what I could learn. The headline of NAR's press release: "Existing-Homes Sales Stable In July." Their discussion of their data points:

Total existing-home sales – including single-family, townhomes, condominiums and co-ops – slipped 0.2 percent ... and are 9.0 percent below the 6.32 million-unit level in July 2006.

...national median existing-home price for all housing types was $228,900 in July, down 0.6 percent from July 2006 when the median was $230,200...

Total housing inventory rose 5.1 percent ... which represents a 9.6-month supply at the current sales pace, up from an upwardly revised 9.1-month supply in June.

Single-family home sales slipped 0.4 percent ... and are 9.3 percent below the year-ago pace...

Existing condominium and co-op sales rose 1.4 percent ... but are 7.5 percent below the 811,000-unit level in July 2006. The median existing condo price was $230,600 in July, up 2.4 percent from a year ago.

NAR's article actually reports more dismal data than that of the NY Times, yet "sales are stable." And they can explain it all:

Lawrence Yun, NAR senior economist, said the market is holding on despite temporary mortgage disruptions. “Home sales probably would be rising in the absence of the mortgage liquidity issues of the past two months...”

I have no idea how he can make that claim. And, as for as the "mortgage liquidity" problem he speaks of, it didn't exist a month ago so it could not have had any impact on July sales.

The NAR reports the data it's collected, but it doesn't adequately put it in the same market context as the NY Times. However, you'd have to look at the NY Times' graphics to get a true grasp of the YoY changes in the market; to its credit, NAR does state that sales volume has fallen 9% YoY.

It's interesting how using differing mixes of text, graphics, and headlines to report the same data can result in differing stories.

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