Economist's Commentary: July 2, 2008
Home Prices Rising?
By Jed Smith, Managing Director, Quantitative Research
NAR produces monthly sales data for the sales of existing homes, including single family sales, condo/co-op sales (including townhouses), and total existing home sales (single family plus condo/co-op). The monthly sales data are also available on a seasonally adjusted annual rate, frequently referenced in the national press. The actual median sales prices associated with the monthly sales are also presented for each home type. However, NAR has not presented seasonally adjusted prices. Instead, NAR assesses price trends based on a comparison of the current month and the same month in the previous year. NAR has not compared month-to month price changes, for the data have lacked seasonal adjustments.
To examine the effects making a seasonal adjustment on monthly prices, we performed a seasonal adjustment on the median home price for sales of existing homes at the national level. We used the X12 procedure in the econometric program EViews to compute the seasonal adjustment. The resulting data are not an official NAR series but are, rather, presented on an experimental basis. We invite comments on the procedure.
The chart shows the effects seasonal adjustment-which can in some instances be significant. In the May Existing-Home Sales report NAR reported that prices in May of 2008 were -6.8 percent lower than the previous May. This was an improvement from the price experience reported in the April report, which had reported year-over-year prices down -8.0 percent. The seasonally adjusted prices between April and May of 2008 show a monthly upturn in prices.
Reported NAR prices can be compared with the Case Shiller results which are, however, reported with an additional month's lag. For example, Case Shiller reported housing prices for April as down 16.3 percent from the previous April. The corresponding NAR figure was -8.0 percent. Case Shiller prices, although widely quoted, do not appear to be representative of national overall prices: coverage is limited to twenty major cities, some of which are concentrated in areas that have experienced the greatest declines in housing prices. However, it is interesting to note that in the limited Case Shiller sample of 20 cities, in the month of April prices rose in 8 of the 20 markets on a month-to-month basis in comparison to March.
This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >
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