Is The Housing Market Really That Hot?

On today’s show we’re trying to make sense of some of the latest statistics that are being reported in terms of national home sales. A new report yesterday in the Wall Street Journal reported that home sales rose to a new 14-year high in September, bolstered by robust demand and a shortage of homes for sale that is making the housing market one of the brightest spots for the U.S. economy. Existing-home sales are up 9.4% in September from August to a seasonally adjusted annual rate of 6.54 million, the highest rate since May 2006, according to the National Association of Realtors. The September sales represent a 20.9% increase from a year earlier. The numbers of August sales were similarly glowing. The August existing home sales were up 9.1% compared with 2019. All of this points to a booming housing market, one of the brightest spots in the economy. But here’s the problem. Depending on how you slice and dice the data you can construct a different narrative, a different explanation of what it happening. We all know that we went through an artificial downturn in housing sales in the Spring. This was the result of widespread shutdowns of the economy and the shelter in place orders that were in effect for close to 90 days across major parts of the nation. If you compare sales in the first 9 months of 2019, to the first 9 months of 2020, we have not yet matched the sales volume of 2020. In fact, in the year to date we have only sold 97.9% as many houses compared with 2019, a reduction of 2.1% compared with this time last year. Are we having a booming market? Are we just catching up from the shutdown in the spring? The number of home sales in 2018 were higher, 2017 were higher, 2016 were higher. You would have to go back to 2015 to find a rate of home sales that are on par with the year to date numbers for 2020. Yes, we’ve had a strong recovery in home sales. But comparing the September 2020 statistics to the same period last year makes no sense. It’s not a reasonable comparison. It’s a little bit like putting a dam in a river that flows continuously. You then open the dam and say “Wow look at how much water there is.” No kidding Sherlock. It may be amazing how much water is flowing, but not surprising. The pundits that are used to reporting statistics a certain way, are continuing to do so. Why? Because that’s how they’ve always done it. There’s nothing normal about 2020 in any way. So if you’re going to quote statistics, you need to look at the big picture. I’m tired of seeing the weekly unemployment numbers being reported by the bureau of labor and statistics. Fewer people filed for unemployment this week, so they conclude the economy is on the mend. These types of reports are ridiculous to be quite frank. It’s not just the National Association of Realtors who do this. Virtually every real estate board is quoting statistics the same way. Why? Because that’s how they’ve always done it. Even in my home city of Ottawa Canada, the same thing is happening. Last week, the September numbers were published for my home town. The numbers are amazing. Sales volumes are up 35.1% compared with the same month in 2019. Hurray. But if you zoom out and look at the big picture, sales volume is down 4.9% compared with the comparable first 9 months of 2019. Look folks, I have no problem with taking a look at statistics. They can be very helpful in determining what is happening in the market. But when statistics are published, I urge you to apply your own thinking and analysis to what the numbers mean. Don’t get me wrong, I don’t think anyone is out to mislead you about what is happening in the market. Don’t just accept a journalists interpretation as the truth because it may not be the entire picture.